Analyst Note| Xavier Lee |
Narrow-moat CapitaLand Integrated Commercial Trust is acquiring two Grade A office buildings in Sydney from CLA Real Estate Holdings, the controlling shareholder of CICT’s sponsor, CapitaLand Investment Limited. CICT’s total acquisition outlay, after acquisition fees, is about AUD 381 million, based on the adjusted net asset value of the trusts holding the assets and an agreed property value of AUD 672 million. This deal marks CICT’s first foray into Australia and is part of a wider portfolio reconstitution plan to allocate 20% of its portfolio to overseas developed markets. The acquisition is expected to increase CICT’s overseas portfolio exposure by 3 percentage points to 7% and overall portfolio property value to SGD 22.4 billion. By redeploying the net proceeds from One George Street divested at a 3.17% exit yield into the two Sydney office assets with a combined initial net property income yield of 5.2%, the trust also executes on its value-creation strategy to recycle capital from lower-yielding assets into higher-yielding assets. Our distribution per unit estimates are increased by 2.5% and 1.8% for 2022 and 2023, respectively, after factoring this acquisition into our model. We retain our SGD 2.66 fair value estimate. We think the units are attractive at this price and continue to like CICT for its high-quality assets and tenant register. We believe the trust can ride out the uncertainty and exit the pandemic strongly.