CapitaLand Investment Sells Stapled Securities for S$162 Million
CapitaLand Investment (CLI), through its subsidiary The Ascott Ltd, has successfully divested its stapled securities in CapitaLand Ascott Trust (Clas) for S$162 million, according to a recent bourse filing.
Details of the Sale
More than 185 million stapled securities, equivalent to approximately 4.9% of Clas, were sold to an unrelated entity at the closing price recorded on December 18. Stapled securities are unique financial instruments that combine two or more different securities, with Clas consisting of units from CapitaLand Ascott Real Estate Investment Trust (Reit) and CapitaLand Ascott Business Trust.
Changes in Ownership
Following this transaction, CLI’s stake in Clas has decreased from 28.92% to 24.04%. As a result, Clas will transition from being a subsidiary of CLI to being classified as an associate of the parent company. This change signifies a shift in ownership control: a subsidiary is controlled by the parent company, while an associate signifies that the parent holds a minority interest.
Strategic Implications
CLI indicated that this sale aligns with the group’s asset-light growth strategy. The reduction in ownership in Clas reflects CLI’s broader objective of fostering sustainable growth through enhanced capital efficiency and maximizing returns on equity.
Despite the decrease in holdings, CLI reassured stakeholders of its commitment to align with the interests of Clas’ stapled securityholders over the long term.
Financial Impact
With the completion of this transaction, CLI anticipates recognizing an estimated loss of around S$141 million. According to current accounting standards, the parent company will only reflect a share of the profits or losses from associates in its financial statements, rather than fully consolidating them as it would with a subsidiary.
Of this projected loss, approximately S$103 million will be recorded as non-cash, which encompasses foreign currency translation losses and adjustments related to the retained stake, as mandated by accounting regulations.
Market Response
Following the announcement, shares of CLI saw a decline of 1.9%, dropping S$0.05 to close at S$2.56. Similarly, stapled securities of Clas experienced a decrease of 0.6%, ending the day at S$0.87.
This transaction illustrates the dynamic nature of property investments and reflects CLI’s strategic maneuvering in the competitive real estate market.
