SINGAPORE (THE BUSINESS TIMES) - A consortium led by Perennial Real Estate will divest a half-stake in Grade A office building AXA Tower to Chinese e-commerce giant Alibaba Group's Singapore subsidiary, which is an anchor tenant at the property, before redeveloping it.
The consortium will also transfer half of an outstanding shareholders' loan to Alibaba Singapore, the developer said on Wednesday (May 6), without disclosing the size of the loan.
The consideration payable for the 50 per cent equity interest will be calculated based on the net asset value of Perennial Shenton Holding (PSHPL) - which indirectly owns AXA Tower - at the deal's close, and based on an agreed property value of $1.68 billion. Meanwhile, the consideration for the loan will be 50 per cent of the principal outstanding as at closing.
Singapore Press Holdings (SPH), HPRY Holdings and Piermont Holdings are among the investors in the consortium, which is named Perennial Shenton Investors (PSI).
Perennial Real Estate, which indirectly owns an effective 31.2 per cent stake in AXA Tower, said its share of the net proceeds from the transaction will be about $196.4 million. Its share of the divestment gain is approximately $45 million.
In a separate filing, SPH said it will receive about $33.2 million for selling its 5.29 per cent interest in the property, held through its wholly-owned subsidiary PE One.
At the same time, the remaining half of shares in PSHPL as well as the other half of the loan will be transferred to a new consortium, named PRE 13, that has been formed with the same investors in the initial PSI consortium.
Perennial Real Estate will indirectly own 20 per cent of shares in PRE 13 and an effective 10 per cent stake in AXA Tower. Balance proceeds for Perennial Real Estate, after reinvesting into the new consortium, is expected to be about $137.6 million.
SPH said PE One will reinvest $5.9 million for a 2 per cent interest in the new consortium, which translates to a 1 per cent effective stake in the property. In 2015, PE One had forked out $19.3 million to purchase the 5.29 per cent stake in AXA Tower.
Both the sale to Alibaba and the share transfer to the new consortium are expected to complete in around June this year, subject to the conditions precedent being satisfied.
After that, PRE 13 and Alibaba Singapore will create a joint venture to redevelop AXA Tower.
The 50-storey office development with a retail podium is located in Singapore's central business district (CBD).
Approval has already been granted to increase the building's gross floor area (GFA) to 1.24 million square feet from 1.05 million sq ft, Perennial Real Estate said.
It has also obtained approval to further increase the GFA to 1.55 million sq ft, if the redevelopment integrates hotel and residential use under the CBD Incentive Scheme.
Perennial Real Estate chief executive officer (CEO) Pua Seck Guan noted that the divestment aligns with the company's capital recycling strategy while retaining its involvement to create value via the redevelopment of the prime property.
SPH CEO Ng Yat Chung said: "We continue to take a disciplined approach in reviewing our non-core businesses and investments."
"The sale is in line with SPH's prudent capital management and capital recycling strategy which allows us to redeploy the proceeds into our core businesses to create shareholder value," Mr Ng added.
The divestment will not have a material impact on SPH's earnings or net tangible assets for the financial year ending Aug 31, 2020.
As at 3.09pm on Wednesday, SPH shares were trading at $1.58, up $0.07 or 4.6 per cen,; while Perennial fell one cent or 2 per cent to 49.5 cents after its trading halt was lifted.