CapitaLand Integrated Commercial Trust (CICT) announced that they would be buying 50% of ION Orchard for $1.8 billion this week.
The acquisition would be funded entirely by equity fundraising – to the tune of $1.1 billion.
$1.1 billion, that’s A LOT of money to be raising in this climate.
Now CICT is my largest REIT position in my portfolio.
And I’ve been getting a lot of questions about this acquisition.
3 key questions I wanted to discuss:
Is this a good acquisition for CICT? Will I subscribe for the preferential offering? Will I buy more CICT at 5.3% dividend yield? CICT buys Ion Orchard for $1.8 billion
Full acquisition announcement here, but to sum up the key details:
CICT is buying 50% of ION Orchard from its sponsor CapitaLand Investments (CLI). The other 50% will be held by Sun Hung Kai Properties – “a leading property developer and operator in Greater China renowned for premium large scale integrated developments”. Valuation is $3.7 billion (works out to a gross yield of 7.1%) – so the 50% stake that CICT is buying is worth about $1.7+ billion. Because CICT is acquiring from its sponsor (also known as an Interested Person Transaction), shareholder approval will be required for this transaction, and there will be an EGM in due course. Why is the Sponsor, CapitaLand Investment, selling ION Orchard now?
I know the more paranoid investors out there will ask why now?
There’s always a suspicion among REIT investors that what is good for the Sponsor, may not necessarily be good for the REIT.
And if you look at the sponsor CLI’s share price – boy it is not pretty.
Even after the recent rebound, CLI’s share price sits close to
