PROPERTY investment manager CapitaLand Investment (CLI), through its subsidiary The Ascott Ltd, has sold its stapled securities in CapitaLand Ascott Trust (Clas) for S$162 million, said the company in a bourse filing on Thursday (Dec 19).
More than 185 million stapled securities – which represent about 4.9 per cent of Clas – were sold to an unrelated party, which agreed to buy them based on their Dec 18 closing price.
Stapled securities are financial instruments where two or more different securities are listed and traded as one unit. In the case of Clas, its stapled securities consist of units from CapitaLand Ascott Real Estate Investment Trust (Reit) and CapitaLand Ascott Business Trust.
With the transaction, CLI’s holdings in Clas decreased to 24.04 per cent from 28.92 per cent.
Clas will no longer be a subsidiary of CLI, and will instead be accounted as an associate of its parent company.
A company is called a subsidiary when its parent owns a controlling share in it, while an associate is one in which the parent company owns a minority stake.
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CLI said that this sale is part of the group’s asset-light growth strategy. The decrease in holdings of Clas is consistent with CLI’s strategic objective to deliver sustainable growth by optimising capital-efficiency and driving high returns on equity, read the filing.
Nonetheless, CLI noted that it remains committed to aligning its interests with Clas’ stapled securityholders over the long term, despite the drop in holdings.
As Clas will be accounted as an associate with the completion of this transaction, CLI expects to record a loss of approximately S$141 million. Based on current accounting standards, only a share of profits or losses of associates are included in the financial statements of their parent company, though they are not fully consolidated. However, a subsidiary’s revenue is fully consolidated with its parent company.
Of this amount, about S$103 million is non-cash in nature, and includes the realisation of foreign currency translation losses and re-measurement of the retained stake, as required under accounting standards.
Shares of CLI fell 1.9 per cent or S$0.05 to close at S$2.56 on Thursday, while stapled securities of Clas declined 0.6 per cent or S$0.005 to end at S$0.87.
