A consortium led by Perennial Real Estate Holdings will divest a half-stake in AXA Tower to Chinese e-commerce giant Alibaba Group's Singapore subsidiary, which is an anchor tenant at the property.
Work on redeveloping the 50-storey Grade A office building in the Central Business District (CBD) will get under way once the deal has been completed.
The consortium will also transfer half of an outstanding shareholders' loan to Alibaba Singapore, the developer said yesterday, without disclosing the size of the loan.
The amount payable for the 50 per cent equity interest will be calculated based on the net asset value of Perennial Shenton Holding, which indirectly owns AXA Tower, at the deal's close, and based on an agreed value of $1.68 billion.
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.
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.
SPH said in a separate filing that 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 Perennial Shenton Holding as well as the other half of the loan will be transferred to a new consortium, PRE 13, which has been formed with the same investors in the initial Perennial Shenton Investors 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 into a 1 per cent effective stake in the property. In 2015, PE One paid $19.3 million to buy the 5.29 per cent stake in AXA Tower.
The sale to Alibaba and the share transfer to the new consortium are expected to be completed around next month, subject to the conditions precedent being satisfied.
PRE 13 and Alibaba Singapore will then create a joint venture to redevelop AXA Tower.
Approval has already been granted to increase the building's gross floor area (GFA) to 1.24 million sq ft from 1.05 million sq ft, Perennial Real Estate said.
It has also obtained approval to 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 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."
He added: "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."
The divestment will not have a material impact on SPH's earnings or net tangible assets for the financial year ending Aug 31.
THE BUSINESS TIMES