Singapore’s Perennial Real Estate Holdings has broken through a virus-induced lull in the investment market to notch the Southeast Asian financial hub’s biggest property sale so far in 2020.
The SGX-listed developer announced today that it has agreed to sell its remaining 30 percent stake in 111 Somerset to a unit of casino magnate Stanley Ho’s Shun Tak Holdings for cash consideration of S$155.1 million ($108.65 million) along with taking on debt associated with the property.
The transaction gives Shun Tak 100 percent ownership in the 17-storey commercial complex in Singapore’s Orchard Road area just over three years after the Hong Kong-listed firm took a controlling stake in 111 Somerset.
The deal will also provide Perennial with cash needed to pay off S$1.3 billion in debt set to mature this year.
Shun Tak Buys Out Partner After Renovation
The sale agreement comes after the 766,550 square foot (71,215 square metre) complex, which includes a pair of office towers joined by a retail podium next to the Somerset MRT station, had undergone a makeover last year after some of the office floors had been sold off on a strata title basis.
The renovations included modernising the retail area and incorporating around 32,000 square feet of health care offices into the complex, as well as improving the common areas. The enhancement program for the 1977-vintage property cost S$120 million, according to Perennial’s statement.
Under the terms of the sale and purchase agreement, Shun Tak’s payment is subject to adjustment based on the net strata area of the property as well as to net asset value of the complex following the enhancement work which is assumed to be finished before completion of the transaction.
Shun Tak is set to pay 80 percent of the consideration within five business days following the completion date, with the remaining 20 percent to be paid within 10 business days after computation of any adjustments to the value of the property.
Perennial indicated that it expects completion to take place by 31 May 2020 or five business days after the conditions of the sale and purchase agreement have been fulfilled. The company said it would realise a net pre-tax gain of around S$25 million on the disposal, and would continue to manage the property following the transaction.
Perennial Deals with Debt Load
The property sale comes at an opportune time for Perennial, which has a S$280 million bond maturing on 29 April, and another S$100 million note due on 3 July with a third batch of credit instruments worth S$180 million set to come to term on 28 August. On 3 April the company had announced that it had secured a S$250 million loan facility to partially fund repayment of the bond due at the end of this month.
Shun Tak is purchasing Perennial’s 30 percent stake in 111 Somerset after the Hong Kong group had upped its holdings in the property to 70 percent in February 2017.
In that earlier transaction, Shun Tak had bought a 61 percent holding in the asset from a consortium of investors which had teamed with Perennial to purchase 111 Somerset in 2013. Shun Tak had previously held a 9 percent stake in the complex.
In that 2017 deal, Perennial also reduced its holding in the property from just over 50 percent to 30 percent.