The sale also gives an exit ebitda yield of 3.2% and will help unlock some 21 billion yen, or $187.4 million in net proceeds for the trust.
CLAS explains that the asset is a mature property requiring substantial capex and temporary closure should enhancement works be done.
According to Wong, citing CLAS' management, proceeds will be used to repay onshore loans denominated in yen and also more expensive debt, largely in pounds, that costs a weighted 4.6% vs 1HFY2025 cost of debt of 2.9%.
"We see this as a catalyst for 2026, given that the acquisition will be completed towards end-2025," says Wong in her Aug 1 note.
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The deal will lower CLAS' gearing 37.8%, vs 39.6% as of June, if proceeds are fully recycled to pare down debt.
The transaction will also help add 1% to the REIT's FY2024 DPU on a pro forma basis.
Following this sale, CLAS will have greater debt capacity and flexibility to pursue accretive transactions to grow and diversify its earnings base.
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CLAS sees opportunities in the living sector in Japan, particularly in rental housing.
In her Aug 1 note, Ada Lim of OCBC Investment Research points out that CLAS has had a strong track record in portfolio reconstitution in recent years, achieving divestments at attractive premiums to book and redeploying proceeds into higher-yielding assets.
Lim has kept her "buy" call and $1.02 fair value.
