• Blackrock is in due diligence stage to acquire Citadines Raffles Place which CICT owns a 45% JV stake
• Divestment price is reported to be SGD300m or SGD1m / key matching recent central hotel transactions 
• Deal comes at an instrumental time of a turn in IR, proceeds of SGD135m reduces debt by 40 bps but can be more meaningfully deployed as acquisition gunpowder
• Maintain BUY with TP of SGD2.30

 What’s new? Blackrock is in reports to be in the final stage of negotiation to purchase Citadines Raffles Place, the serviced residences sitting within CapitaSpring in which CICT has a 45% JV stake in. The reported deal price of SGD300m tanslates close to SGD1m / key on 299 units within the property and matches to market transactions that we have seen for central-located lodging assets, including CapitaLand Ascott Trust's divestment of Citadines Mount Sophia earlier this year. The asset sits on CICT's books at a 3.75% valuer cap rate and comes in an environment of peakish hotel rates and short-term uptick in hotel room supply in Singapore where we have seen the return of Grand Hyatt Orchard post AEI and the sizeable launch of Mercure Hotel at Club Street with 987 rooms. 

Our thoughts. The completion of the deal will free up c.SGD135m in proceeds recycled back to CICT.  The deal has been much anticipated by the markets in CICT's divestment strategy of non-core assets with limited further valuation uplift - other assets in the portfolio on the divestment radar includes the likes of Bukit Panjang Plaza and 21 Collyer Quay. Proceeds can be used to pare down debt in the immediate term, which will see a small c.40bps drop to our gearing and negligible impact to our DPU estimates. Hotel sits within the integrated development exposure of CICT’s portfolio, held with an underlying master lease, and has never been an integral part of CICT’s portfolio strategy. The divestment of the asset as we head a turn in interest rate environment will free up capital to be redeployed in a timely manner to acquire more meaningful assets or even vehicles within Singapore.



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