Chip Eng Seng unit to acquire minority interest in a Shenton Way property for S$2.1m

PROPERTY player Chip Eng Seng Corporation : C29 0% is planning to acquire a minority stake in a property located at 8 Shenton Way, also known as AXA Tower, for S$2.1 million.

Its wholly-owned subsidiary CEL Shenton has entered into a share purchase agreement with the sellers to acquire 21 per cent of the issued share capital of PRE 13, which has an effective interest of 50 per cent of the property.

The acquisition will see CEL Shenton holding an effective interest of 10.5 per cent in the property, Chip Eng Seng said on Tuesday (Apr 5).

The property, which is a 50-storey landmark Grade A office development with a retail podium, has a total site area of 10,984 square metres (sq m), and a 99-year leasehold land tenure starting from Jul 19, 1982.

Chip Eng Seng noted that the property is intended to be redeveloped into a mixed-use commercial and residential development comprising office, retail, hotel and resident components, subject to relevant approval, which includes approval for a fresh 99-year lease. If the redevelopment takes place, the property will have a maximum allowable gross floor area of 144,162 sq m and a gross plot ratio of 13.125.

The property is currently owned by Perennial Shenton Property, which is in turn owned by Perennial Shenton Holding. PRE 13 owns 50 per cent of Perennial Shenton Holding, while the other 50 per cent is owned by Alibaba Singapore Holding.

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Meanwhile, the other shareholders of PRE 13 include Perennial Singapore Investment Holdings, Wilmar International unit Piermont Holdings, and HPRY Holdings, which is owned by a director and controlling shareholder of Perennial Holdings Kuok Khoon Hong. These shareholders will continue to hold a majority stake in PRE 13 after the proposed acquisition, translating to a 29 per cent effective stake in the property.

In a separate announcement, Perennial noted that the equity consideration for the transactions was based on an agreed asset value of S$1.7 billion for the property. In 2015, a consortium led by Perennial Real Estate Holdings had acquired the property at a purchase price of S$1.2 billion.

It said transactions are expected to be completed by the end of April, while preliminary redevelopment works at the property have already commenced and are expected to be completed in 2028.

Perennial, an integrated real estate and healthcare company, is expected to provide property management and asset management services upon the completion of works.

Chip Eng Seng expects the proposed acquisition will allow it to acquire a "meaningful stake" in a prime real estate in the Central Business District, while its participation in a large-scale redevelopment project with other partners should help mitigate financial and execution risks.

Under the proposed acquisition, CEL Shenton will, among others, commit up to S$251 million in loans for the property's redevelopment and funding requirements. It will fund the acquisition through internal cash sources, and CEL Shenton's pro-rata share of the equity portion of the total redevelopment costs for the property will be funded from internal cash sources and/or bank borrowings.

The company does not expect the acquisition will have a material impact on its net tangible assets and earning per share for the current financial year ending Dec, 31 2022.

Additionally, Chip Eng Seng also noted that Sing-Haiyi Emerald - an associate company of its controlling shareholders Gordon Tang and Celine Tang - has also separately agreed to acquire a similar stake in PRE 13 with the same consideration, that will result in it holding an effective stake of 10.5 per cent in the property.

Shares of Chip Eng Seng closed up S$0.005 or 1.1 per cent at S$0.45 on Monday.

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