Far East Hospitality Trust to divest Central Square for $313.2m

A potential incentive fee of up to $18m may be applied.

Far East Hospitality Trust will be entering into a put and call option agreement with CDL Constellation Pte. Ltd., a subsidiary of City Developments Limited (CDL) for the divestment of its interest in Central Square for a consideration of $313.2m.

Central Square is located at 20 Havelock Road and consists of serviced residences and commercial spaces. Currently, Far East H-REIT holds the leasehold interest of a remaining term of around 70.7 years in the property.

The divestment consideration represents a 57.9% premium of an earlier independent valuation of $198.3m as of 31 December 2020, and a 70.8% premium on the original purchase price of $183.3m in August 2012.

Far East H-Trust is expected to attain an estimated net gain of $112m, following the accounting of transaction-related costs.

This comes after working closely with CDL to acquire outline permission from the Urban Redevelopment Authority. With this, the property can be redeveloped up to a maximum gross floor area (GFA) of 31,758 square meters and a height of 20 storeys, up from the current GFA of 17,858 square meters and height of seven storeys.

Knight Frank Pte. Ltd. will serve as the marketing agent to invite bids from interested purchasers.

“This transaction allows us to realise significant value for our Stapled Securityholders. The strong divestment gain highlights the latent value and potential of our assets. The proceeds will be used to first pare down Far East H-Trust’s debt to strengthen its balance sheet. With the increased financial flexibility, the Managers can seek out opportunities to redeploy the proceeds to higher-yielding assets to improve the performance of the Trust,” said Gerald Lee, CEO, Far East Hospitality Trust.

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