OUE to sell iconic US Bank Tower well below valuation, for $598m

Developer OUE will sell US Bank Tower - known for its cameos in Hollywood movies such as Independence Day, Rush Hour and San Andreas - for well under its value.

The sale price of US$430 million (S$597.7 million) is about two-thirds the property's US$650 million fair value as at Dec 31 last year, according to OUE's annual report.

The price to be paid by the buyer - USBT Property Owner - was arrived at after taking into account the property's market value and the state of that market amid the pandemic, said OUE yesterday.

The mainboard-listed company said last month that it was in talks with a possible institutional buyer.

Several United States media outlets reported that New York-based real estate investor Silverstein Properties - whose portfolio includes the new World Trade Center in New York - had been in advanced discussions to buy the iconic US Bank Tower and was negotiating a price in the range of US$425 million to US$450 million.

It was also reported that initial expectations had been for bids to come in at around US$700 million.

OUE's earnings per share is expected to decline by about 35 cents for this fiscal year as a result of the disposal.

This impact is mainly non-cash and arises from the difference between the sale price and the book value as at Dec 31 last year.

US Bank Tower is a Class A block in downtown Los Angeles. It was completed in 1989 and has 72 floors of offices and six levels of underground parking. It also features an outdoor glass slide 305m above ground.

OUE unit Beringia acquired the property in 2013 for about US$367.5 million and undertook renovations, including adding an open-air observation deck called OUE Skyspace LA and the glass slide.

OUE also plans to sell its leasehold interest in OUE Skyspace LA. Beringia is in discussions with "several" prospective purchasers of the Skyspace operations but no agreement has been reached, said OUE.

OUE said the move to sell the office tower came after it evaluated its inventory of assets.

Although the property is being sold below its valuation, it is still expected to benefit the firm and shareholders as it will enable the group to streamline asset ownership in a period when the longer-term outlook for the US property market may not be favourable, OUE said.

Tenants in US Bank Tower have reduced or temporarily shuttered their operations amid the pandemic, which has hit rental income.

OUE said the capital unlocked by the sale can be recycled to better reinvestment opportunities.

The sale will also substantially increase the group's cash reserves and improve its net gearing by paring existing debts.

The transaction is scheduled to be completed around September.

In a separate filing yesterday, OUE Commercial Real Estate Investment Trust's manager disclosed that under its right of first refusal, it had received an offer from OUE to acquire US Bank Tower for US$430 million.

It declined the offer because it felt buying the property on the proposed terms would not be accretive to its distribution per unit.

OUE started marketing US Bank Tower in January last year.

The building was "blown up" in the 1996 blockbuster Independence Day and also appeared several times in Terminator 2: Judgment Day (1991) and other movies in the franchise.

It was also seen in the Rush Hour and Rush Hour 2 movies starring Hong Kong celebrity Jackie Chan and, more recently, the 2015 disaster film San Andreas depicted the tower as one of many buildings that collapsed in an earthquake.

OUE shares closed flat at $1.22 yesterday.

THE BUSINESS TIMES