Alibaba has agreed to acquire a 50 percent stake in Singapore’s AXA Tower in a deal that values the landmark office property at S$1.68 billion ($1.2 billion) in one of the few major transactions the city has seen this year.
The e-commerce giant, which is already an anchor tenant in the building, is buying the half stake from an investment consortium led by Singapore’s Perennial Real Estate Holdings, according to a statement by the SGX-listed developer. JLL acted as exclusive capital markets advisor to Alibaba Singapore on the acquisition.
Following completion of the transaction, which is expected to take place in June, Alibaba and the Perennial-led consortium will redevelop the 50-storey grade A office property in the heart of the city’s central business district into a new integrated complex with commercial, hotel and residential components.
The acquisition comes as a welcome shot in the arm for the city’s commercial property market, which has stalled as a result of COVID-19 with office investment transactions plunging 87 percent to $136 million in the first quarter of the year compared with the previous three months, according to CBRE.
Giving Singapore a Vote of Confidence
“This transaction will provide a confidence boost to the Singapore market and reaffirm investor appetite for CBD assets,” said Ting Lim, JLL’s head of capital markets in Singapore.
Located at 8 Shenton Way, the 1.05 million square foot (97,548 square metre) property has been approved for redevelopment into as much as 1.55 million square feet of gross floor area under the CBD Incentive Scheme which Singapore began implementing last year.
The current structure, which was built in 1986, will be completely demolished and a new complex will be built in its place with around 60 percent devoted to office and retail space, and the remainder taken up by a hotel and luxury residences, according to JLL.
Regina Lim, JLL’s head of Asia Pacific capital markets research, said that the investment by the tech giant represents a vote of confidence for Singapore and demonstrates the city’s attractiveness to technology and e-commerce companies.
“As a result of increased demand for their services and strong capital positions, they have remained active in their expansion and investment plans, with global gateway cities like Singapore proving an attractive destination for deployment,” said Lim.
Joining Forces with a Tech Giant
Under the terms of the agreement, Alibaba will acquire a 50 percent stake in special purpose vehicle Perennial Shenton Holding Pte Ltd and will take on 50 percent of the consortium’s outstanding shareholders’ loan.
The consortium – which includes Singapore Press Holdings and Perennial chairman Kuok Khoon Hong – is selling the stake in AXA Tower five years after acquiring the asset from BlackRock for S$1.2 billion.
Alibaba, which has a controlling stake in Southeast Asia’s largest e-commerce platform, Lazada, is boosting its presence in Singapore after its HK$13 billion listing on the Hong Kong stock exchange last November – the largest equity offering of the year globally.
As China’s largest e-commerce player, Alibaba recorded revenues of over $56.15 billion in 2019 and has a history of investing in corporate real estate to accommodate its operations. In its hometown of Hangzhou in China’s Zhejiang province, the online firm founded by Jack Ma built a corporate campus where 20,000 of its more than 100,000 global team members are employed.
Slimming Down Ownership Interest
The sale of the interest in AXA Tower will provide Perennial with S$137.6 million in cash as the company looks to pay off S$1.3 billion in debt maturing this year.
Just three weeks ago, the company sold its remaining 30 percent stake in 111 Somerset to a unit of casino magnate Stanley Ho’s Shun Tak Holdings for S$155.1 million.
Following the sale of AXA Tower, the firm’s 32 percent stake in the building will be reduced to 10 percent, according to the company’s stock exchange filing.
“The divestment of AXA Tower aligns with our capital recycling strategy to deliver a divestment gain, while retaining our involvement to create value via the redevelopment of the prime property which is strategically sited within the Greater Southern Waterfront with breathtaking sea views,“ said Perennial’s CEO Pua Seck Guan.
In a separate filing, Singapore Press Holdings said that the transaction, which will see its 5.29 percent stake in AXA Tower slimmed down to one percent, represents a divestment of a non-core investment.
“The sale is in line with our prudent capital management and capital recycling strategy which allows us to redeploy the proceeds into our core businesses to create shareholder value,” said the company’s CEO Ng Yat Chung.
Even before the COVID-19 crisis fully gripped its home city, SPH last month announced that its net profit for the half year ending 29 February had fallen by 9.3 percent. Also during April, Chung and other board members said they were taking a voluntary 10 percent cut to their directors fees with the CEO also cutting his pay by the same amount.