Dasin Retail Trust to buy China shopping mall for $274.8m

SINGAPORE - Mainboard-listed Dasin Retail Trust will purchase Doumen Metro Mall in China for 1.374 billion yuan ($274.8 million), its trustee manager announced in a filing late on Sunday (June 30) night.

The trustee manager plans to fund the acquisition through a mix of debt and equity financing. It is proposing a private placement of new units in Dasin Retail Trust at an illustrative issue price of $0.836 to raise around $68.8 million in gross proceeds, and to draw down some S$210 million in bank borrowings.

On June 30, the trustee manager entered into a sale and purchase agreement (SPA) with Zhang Zhencheng - who is the chairman and non-executive director of the trustee manager, and Zhongshan Dasin Real Estate - the sponsor.

Doumen Metro Mall is located at 328 Zhongxing Middle Road, Jingan town in Doumen district of Zhuhai, Guangdong province. Its land use rights expire on Oct 12, 2052.

The shopping mall has a gross floor area (GFA) of about 168,269 square metres (sq m), comprising two underground levels of car park space and six levels above ground.

Its net lettable area (NLA) was around 75,638 sq m, while occupancy was 99.7 per cent as at March 31. It began operations in October 2018. It had a weighted average lease expiry (WALE) of 5.8 years by gross rental income for the month of March 2019, and a WALE of 11.9 years by NLA as at March 31.

The agreed property value of 1.585 billion yuan was negotiated after taking into account the independent valuations by D&P China (HK) and JLL. It represents a discount of about 24.9 per cent to D&P's valuation of 2.11 billion yuan and a discount of 24.5 per cent to JLL's valuation of 2.10 billion yuan.

Under the SPA, Dasin Retail Trust will acquire the property and all the shares in Singapore Jiaxin Commercial Holdings (SJCH). SJCH is the holding company of Jia Xin Holdings, which in turn wholly owns Zhuhai Xinminyang Investments (ZXI). ZXI holds the mall as well as the mall's rental management firm, through its wholly owned Singapore holding companies.

The total acquisition cost of 1.374 billion yuan comprises a share consideration of 306.4 million yuan payable to Mr Zhang, the repayment of 1 billion yuan in existing debt of SJCH and its subsidiaries, an acquisition fee of S$2 million payable in units of Dasin Retail Trust to the trustee-manager, as well as professional and other fees and expenses incurred for the acquisition.

The share consideration of some 306.4 million yuan will be paid fully in cash to Mr Zhang. This amount is equal to the adjusted consolidated net asset value of SJCH and its subsidiaries as at completion of the acquisition, based on the mall's agreed purchase price of 1.585 billion yuan less total net liabilities of SJCH and its subsidiaries of around 1.28 billion yuan as at Dec 31, 2018.

The business trust's existing portfolio comprises four retail malls in Zhongshan city. The proposed acquisition will thus expand its presence beyond Zhongshan and strengthen its foothold in the Greater Bay area, the trustee manager said on Sunday.

As part of the private placement, controlling unitholder Aqua Wealth Holdings may subscribe to up to 14 million new units, which will constitute an interested person transaction, the trustee manager said on Sunday. Aqua Wealth currently holds about 60.12 per cent of Dasin Retail Trust.

DBS Trustee holds all the shares of Aqua Wealth as the trustee of the Zhang Family Trust, and Mr Zhang makes investment decisions on behalf of this family trust.

Mr Zhang is considered an interested person under listing rules, as he is deemed interested in about 66.29 per cent of Dasin Retail Trust as at June 30, making him a controlling unitholder. He is also a director and controlling shareholder with a 99 per cent stake in the trustee manager.

The mall acquisition and the placement of new units to Aqua Wealth are both subject to the approval of unitholders of Dasin Retail Trust.