ART is selling a building for 64.3% above the independent valuation which was as of Dec 31, 2018. Either the property valuers don’t know what they are doing, or the buyer is crazy. I have not met any crazy people with 353 million dollars to spend on a building…
Beauty in the eyes of beholder no? Valuation seems more of an art than science
It could be. It shouldn’t be. The NAV of the shares is wholly dependent on “artistic” feelings. I am benefiting in this case, with the stock being re-rated higher, but I shudder to think how many other gems are in balance sheets of REITS which might just as easily be over-valued
9 January 2006 (as amended))
CLARIFICATION ANNOUNCEMENT ON LETTER PUBLISHED
IN THE FORUM SECTION OF THE STRAITS TIMES
Ascott Residence Trust Management Limited (the “Manager”), as manager of Ascott Residence Trust (“Ascott REIT”), refers to the letter published in the forum section of The Straits Times on 21 January 2019 titled “Probe in big difference in valuation and buyout amount”.
The Manager wishes to clarify that the valuation of Ascott Raffles Place Singapore as at 31 December 2018 was conducted as part of Ascott REIT’s annual valuation exercise for the entire portfolio of Ascott REIT. It was commissioned by DBS Trustee Limited, as trustee for Ascott REIT. The valuation of Ascott Raffles Place Singapore was conducted by Colliers International, an independent valuer, using the discounted cashflow method, which is consistently applied by Ascott REIT and generally in line with market practice.
Ascott REIT’s assets are held primarily to generate stable long-term rental income, which forms its principal source of recurring cashflow.
In respect of the sale, an independent property consultant, Cushman & Wakefield, was engaged to conduct a marketing exercise for the divestment of Ascott Raffles Place Singapore. The sale and purchase agreement for the divestment was signed on 9 January 2019 and the sale price of S$353.3 million reflects the highest offer received during the exercise. As disclosed in the Manager’s announcement of 9 January 2019, the sale was to an unrelated third party.
The Manager wishes to clarify that all divestments are carefully considered by the Manager and the divestment of Ascott Raffles Place Singapore was approved by the Board of Directors in accordance with the applicable legal and regulatory legal requirements.
By Order of the Board
Ascott Residence Trust Management Limited
(Company registration no. 200516209Z)
As manager of Ascott Residence Trust
21 January 2019
So it comes down to valuing on “what is” - cashflow, or valuing on “what can be” like a petrol station on land that could be used to build a high rise.
Willing buyer, willing seller … the value to the buyer is different from the value to the seller.
Value is more than just price :-)
No argument with that, but the original point was that there was a huge difference between the booked value and the selling value days later.
maybe the cap rate can tell how ex it is? any info on that?