Oxley Holdings has appointed new consultants to find a fresh buyer for its Novotel and Mercure hotels on Stevens Road after a previous suitor was found to have breached the terms of a letter of intent for purchase of the S$950 million ($702.20 million) pair of properties, according to an announcement to the Singapore exchange late Thursday.
The newly appointed consultants for the sale – brokerage JLL and its separate JLL Hotels and Hospitality Group, along with CBRE – now have joint exclusive rights to negotiate with new bidders for the 518-room Mercure and 254-room Novotel in Singapore’s Orchard Road area on behalf of the Singapore-listed developer.
The rebooted sale is one of number of disposals that Oxley has had in motion in recent months, including a pending S$1 billion sale of the Chevron House commercial building at Raffles Place, after the developer saw debt levels balloon last year.
Indonesian Said to Miss Payment on Hotels
The new agency appointments by Oxley were announced two days after the mid-sized real estate developer declared to the bourse that would-be buyer Gracious Land Pte Ltd had failed to meet the deadline for a scheduled deposit of S$38 million, forcing the termination of a preliminary agreement to sell the properties for S$950 million.
Gracious Land – a recently formed private firm reportedly owned by Indonesian tycoon Tahir, the founder of the Mayapada Group – had been in the process of carrying out its due diligence on the properties, which Oxley had developed on a 103-year leasehold site it had purchased in 2013 for S$318 million.
The erstwhile buyer had made an initial deposit payment of S$9.5 million for the properties in early January, but had missed a subsequent payment due on 28 February, according to the statement from Oxley.
According to the developer, it has served notice to Gracious Land that it has terminated the letter of intent with immediate effect, and had informed the buyer that the initial deposit of S$9.5 million would only be refunded if “certain” criteria set out in the letter of intent were met, despite Gracious Land already having requested a refund from the developer. Gracious Land has yet to comment publicly on the failed transaction.
Following the announcement, Oxley’s share price fell by nearly six percent to close on Thursday at S$0.32 per share and remained at $0.32 per share at closing time on Friday.
Moving Assets in Asia and Europe
The collapse of the deal comes at an inconvenient time for the debt-laden real estate developer, which has been making a concerted effort to deleverage.
Oxley Holdings, run by PropertyGuru Property Report’s 2017 Singapore personality of the year Chiang Chiat Kwong, had been involved in a number of property disposal discussions over the past few months, following a spending spree last year that saw the developer’s debt levels soar. Earlier this month, Mingtiandi reported that Oxley intended to sell Chevron House at Raffles Place to US real estate fund manager AEW for S$1.025 billion, in a deal which is also in due diligence.
The developer’s attempts to sell its Stevens Road hotels also come after it had agreed in November to sell a leasehold interest in a Dublin mixed-use property for euros 106.5 million ($120.4 million). In January, the company sold another asset in the same Dublin project to US multi-family investor Greystar for euros 175.5 million ($198.4 million).
Setback in Liquidity Drive
According to local business publication The Edge Singapore, DBS Vickers Securities analyst Rachel Tan previously estimated that the sale of the Mercure and Novotel hotels would have reduced Oxley’s net debt-to-equity ratio, from 2.5 times (as at September 2018) to 1.8.
The proceeds from the hotel sale would also help solve some of the group’s urgent cash requirements, such as the looming repayments of its $$300 million and S$150 million retail bonds, due to expire in November and May 2020 respectively.
The Mercure and Novotel hotels on Stevens Road were opened in late 2017 and generate, according to Oxley, a recurring income of S$53 million per year at 83 percent occupancy. They are Oxley’s only Singapore hospitality assets, but it has hotels under development in Cyprus, Kuala Lumpur and Phnom Penh.
Update: This story updates a previous version which stated the previously agreed sale price for the properties as S$905 million. The story has been updated to show the correct figure of S$950 million.