Far East Hospitality Trust completes $313.2 mil divestment of Central Square

SINGAPORE (EDGEPROP) - Far East Hospitality Trust has completed a $313.2 million divestment of Central Square to City Developments (CDL) on March 24. This amount is 70.8% more than the $183.3 million it paid for in August 2012. It could also potentially receive an incentive fee of up to $18 million, subject to certain conditions.

See also: Far East Hospitality Trust secures first sustainability-linked loan worth $125 mil from OCBC

CDL announced its purchase of Central Square last December, which it intends to redevelop together with its adjacent Central Mall to create a large, mixed-use development under URA's Strategic Development Incentive scheme. Presently, Central Square is a 99-year leasehold commercial and residential development, with a remaining lease tenure of approximately 72 years. (Find Singapore commercial properties with our commercial directory)

“This divestment represents an attractive exit yield of 1.8%, allowing us to realise significant value for our stapled securityholders,” says Gerald Lee, chief executive officer of FEO Hospitality Asset Management, the manager of Far East Hospitality REIT and FEO Hospitality Trust Management. The exit yield is calculated based on the net property income for the financial year ended Dec 31, 2020, over the divestment consideration.

Proceeds from the transaction will be used to reduce debt and lower the aggregate leverage from 41.3% to 33.5%, in addition to providing greater financial flexibility to seek out potential yield accretive opportunities, adds Lee.