Wheelock Makes S$2.5B Buyout Offer for Singapore Subsidiary

An index of property shares on the Singapore stock market rose by around 16 percent in the first half of 2018, but even that healthy increase hasn’t been enough to prevent Hong Kong-listed Wheelock and Company from seeking to take its SGX-listed Wheelock Properties unit private.

The parent company, which owns 76.21 percent of its Singapore arm, made an offer today to buy out its shareholders at a rate of S$2.10 per share — 20.7 percent over the stock’s price when trading was halted on July 13th. The unconditional offer values Wheelock Properties at over S$2.5 billion ($1.8 billion).

The Hong Kong-based parent firm is seeking to privatise its Singapore unit after the company’s share price stagnated for over half of a decade, as investors in the city state continued to favour high tech equities, financial institutions or plays on the China market over domestic property players.

Stock Stagnation Triggers Takeover Bid

Despite a property boom in Singapore, Wheelock Properties’ stock price had slid more than 15 percent during the first six months of 2018, closing at S$1.63 per share at the end of June after trading as high as S$2.12 in early 2010.

According to an offer announcement prepared by DBS and posted to the Singapore Exchange today, Wheelock Properties net asset value at the end of March was over S$3.2 billion — equivalent to a NAV per share of S$2.68. At the offer price of S$2.10 per share, Wheelock is able to buy out their shareholders at a discount of over 21.6 percent to NAV per share. In trading today, the company’s share price closed at S$2.18.

In the statement, Wheelock and Company said that it plans to delist the subsidiary, and if necessary, exercise the compulsory acquisition of shares not sold. It believes that by wholly owning Wheelock properties it will be able to better manage the business and more efficiently utilise resources.

The stock price of Wheelock Properties has not moved much in over half a decade, with the shares hitting a recent low of S$1.56 after the cooling measures were announced.

Could More Property Companies Be Ripe for Buyouts?

Prior to ARA Asset Management’s $1.8 billion buyout of its shareholders last year, in conversations with Mingtiandi, sources familiar with the company’s strategy had expressed frustration at the lack of liquidity for property stocks on the Singapore Exchange and noted a gap between the net value of the company’s assets and its share price.

Now, analysts are raising the possibility that, should Wheelock’s transaction be successful, more Singapore deals are anticipated as companies seek acquisitions or the buyout of subsidiaries that are trading far below their book values.

While no deadline has been given for Wheelock’s buyout, the offer announcement indicates that the deal is expected to be completed by 7 September at the earliest.

Wheelock Gets Active in a Hot Market

Wheelock and Company, which also owns 62-percent of the Wharf Group, is a major player in the Hong Kong property market and has been especially active in high profile deals. In March 2018, it paid troubled HNA HK$6.36 billion ($810 million) for two plots of land at Hong Kong’s Kai Tak airport site. In late 2017, the company sold 8 Bay East in Kwun Tong for HK$9 billion, bringing its total take in Kowloon East to HK$20 billion in a three-year period. Early in 2018, the company sold 750 units in its Malibu project at Tseung Kwan O in a single weekend.

Wheelock, which has a 7.9 million square foot land bank, has traded poorly in the market in recent months along with other property companies in Hong Kong. The announcement of the Wheelock Properties offer was followed by only a slight increase in the stock price. Wharf, which owns Times Square in Causeway Bay, spun off Wharf Real Estate Investment (REIC) in late 2017.

Wheelock Properties’ Assets in Singapore and Elsewhere

As the group’s Singapore unit, Wheelock Properties owns five assets, four of them in the city-state. Wheelock Place on Orchard Road is a 16-storey commercial building with 43,280 square metres of gross floor area, and had an occupancy rate of 95 percent at the end of 2017. Also on Orchard Road, the company has Scotts Square, with 30,538 square metres of residential space and 338 units in two towers and 12,161 square metres of retail space. The residential units were 89 percent sold at the end of 2017, while the retail side was 98 percent let.

Also in Singapore. Wheelock has the Panorama, a six-tower residential complex that received its Temporary Occupation Permit in late 2017. All 698 units in the 71,156 square metre GFA building had been sold by then. The Ardmore Three, a 15,826 square metre GFA residential building with 84 units at 3 Ardmore Park, is 100 percent sold.

The company also has one property development in Hangzhou, China, the Fuyang project. Only three units remained at the end of 2017 from the 784-unit Phase 1 and 2a of that asset.