Ascott REIT to divest 81 units in Somerset Grand Fortune Garden

Strate sale has commenced.

Ascott Residence Trust Management Limited, as manager of Ascott Residence Trust (Ascott REIT), wishes to announce that its wholly-owned subsidiary, Somerset FG Pte. Ltd. (Somerset FG) commenced launching of a strata sale under which it is intended that Somerset FG will enter into sale and purchase agreements with separate individuals to divest 81 units in a serviced residence property.

This property is located at No. 46 Liangmaqiao Road, Chaoyang District, Beijing, the People’s Republic of China and operated as Somerset Grand Fortune Garden. Somerset Grand Fortune Garden comprises a total of 221 units, of which 81 units are owned by Ascott REIT and the balance of which are held by third party owners.

The Manager has commissioned an independent property valuer, DTZ, to value the Somerset Grand Fortune Garden Units. DTZ has conducted the independent valuation using the direct comparison approach and investment approach.

The sale consideration for the Somerset Grand Fortune Garden Units, when fully sold, is estimated to be RMB628.0 million (approximately S$128.1 million), as derived from the independent valuation. The sale consideration for each Somerset Grand Fortune Garden Unit will also be negotiated on a willing-buyer and willing-seller basis after taking the independent valuation into account.

Based on the unaudited financial statements of Ascott REIT for the financial period ended 30 June 2013, the book value of the Somerset Grand Fortune Garden Units is approximately S$48.2 million. As the Sale Consideration is approximately S$128.1 million, the amount of excess over book value of the Somerset Grand Fortune Garden Units is approximately S$79.9 million.

Assuming all the Somerset Grand Fortune Garden Units are sold, the current estimated net gain from the Divestment will be approximately RMB180.7 million (approximately S$36.9 million), after taking into consideration estimated divestment-related expenses such as taxes, sale agent commission and other professional fees. It is envisaged that Ascott REIT will only be able to receive the net sale proceeds from the Divestment after all divestment-related expenses payable in the People’s Republic of China are fully satisfied.

The net sale proceeds from the Divestment will, when received, be used for funding future acquisitions. Pending such deployment, the net sale proceeds, subject to relevant laws and regulations, will be used to pare down the debts of Ascott REIT and its subsidiaries or may be deposited with banks and/or financial institutions or for any other purpose on a short-term basis as the Manager may, in its discretion, deem fit.

A third-party owner who owns a total of 100 units in Somerset Grand Fortune Garden had earlier commenced a separate strata sale of the 100 units. This has resulted in increasing difficulty for Ascott REIT to continue operating Somerset Grand Fortune Garden. In light of the foregoing, the Manager has decided to divest the Somerset Grand Fortune Garden Units.

The Manager believes that the Divestment will enable Ascott REIT to unlock the underlying value of the Somerset Grand Fortune Garden Units and reconstitute its portfolio. The net sale proceeds from the Divestment will be reinvested in other higher yielding assets to enhance Ascott REIT’s portfolio.