CapitaLand Ascott Trust Sells Citadines Central Shinjuku Tokyo: Shareholders Approve S\$34M Tax-Heavy Divestment in Strategic Portfolio Shift

Extraordinary General Meeting Approves Major Asset Sale Amid Portfolio Realignment

CapitaLand Ascott Trust (CLAS) has secured shareholder approval at its Extraordinary General Meeting (EGM) on 26 September 2025 for a significant asset divestment: the sale of its entire beneficial interest in Citadines Central Shinjuku Tokyo. This transaction, classified as an interested person transaction, was passed with overwhelming support, with 99.76% of votes cast in favour.

Key Points and Details Investors Must Know

• Divestment Details: CLAS will sell Citadines Central Shinjuku Tokyo to ML Estate Co., Ltd. (the “Purchaser”), after a competitive bidding process involving five bidders. The highest bid came from CapitaLand Japan Kabushiki Kaisha (CapitaLand), a related party, with the Purchaser acting in a structure requested by CapitaLand.
• Financial Impact: The divestment includes a substantial tax expense of S\$34 million, comprising a Japanese local corporate income tax of approximately 35% on divestment gains and a 5% withholding tax on repatriated dividends to Singapore. These taxes are regulatory and unavoidable, according to management.
• Use of Proceeds: Proceeds from the sale will be used to repay existing debt with an effective interest rate of 4.6% per annum—targeting higher-cost loans to immediately accrete value and lower gearing. The CEO emphasized that paying down debt frees up debt headroom for future acquisitions and asset enhancement initiatives (AEIs).
• Strategic Rationale: The property had not been renovated for over 10 years, and its systems were nearing the end of their useful life. Management determined that continued profitability would be unsustainable beyond the next 6-12 months, necessitating either a major overhaul or divestment. Given CLAS’ focus on delivering consistent distributions, and the inability to fund multiple AEIs concurrently without affecting payouts, the sale was deemed optimal.
• Transparency and Process: The transaction was conducted via a pre-qualified tender to ensure only credible bidders participated. Of five bids received, CapitaLand’s was the highest, with the spread to the second-highest bid under JPY1 billion, indicating a competitive process.
• Portfolio Rebalancing: The CEO highlighted that CLAS has other AEIs and acquisitions in the pipeline, including the redevelopment of Somerset Liang Court Singapore and upcoming renovations for the Cavendish Hotel in London and Sydney Central Hotel. In 2025, CLAS also acquired two hotels and three rental housing properties in Japan, underscoring ongoing portfolio renewal.

Price-Sensitive and Shareholder-Relevant Information

• Material Tax Impact: The S\$34 million tax expense is meaningful and reduces net proceeds, but management believes value is unlocked even after taxes.
• Debt Repayment Strategy: Targeted repayment of higher-interest debt could improve earnings and financial flexibility, potentially supporting future distribution growth or acquisitions.
• Transaction with Related Party: As an interested person transaction, non-independent directors abstained from recommendations and voting, while independent directors voted in favour. The process was reviewed by independent advisors and external auditors to ensure fairness.
• Potential for Future Acquisitions: The CEO confirmed that the sale proceeds could be enough to fund another property acquisition, depending on size, and that CLAS is actively seeking new opportunities.

Questions from Shareholders—Transparency and Concerns Addressed

• Shareholders questioned the rationale for the transaction structure and whether a joint redevelopment with the Sponsor could avoid taxes. Management clarified that the need for immediate distributions and the risk of multiple concurrent AEIs made divestment preferable.
• Clarifications were sought on the cost, book value, and interest rates on debt to be repaid. The CEO explained that the divestment proceeds would be used to pay down higher-cost, blended debt, not just loans tied to the property itself.
• Independent valuers and financial advisors were appointed after obtaining quotations from major international consultants. The tender process was selective to screen out non-bona fide bidders.

Voting Results and Closing

The resolution to approve the divestment was passed with 99.76% of votes in favour. The meeting concluded with management reiterating its commitment to transparency and ongoing portfolio renewal.

Investor Takeaways: Potential Share Price Impact

• The successful divestment, despite the heavy tax cost, is expected to unlock value, deleverage the balance sheet, and provide flexibility for future yield-accretive investments.
• The clear, competitive sale process and strong governance should reassure investors regarding the handling of related-party transactions.
• Active portfolio renewal and prudent capital management could enhance CLAS’s long-term value proposition, potentially supporting share price performance.

Disclaimer: This article is based on official minutes and presentations from CapitaLand Ascott Trust’s EGM held on 26 September 2025. It is intended for informational purposes only and does not constitute investment advice. Investors should conduct their own due diligence and consult with professional advisors before making investment decisions.

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