Hotel Prop in JV to buy former Royal Mail centre in London
Singapore
HOTEL Properties on Wednesday said it has formed a 70:30 joint venture (JV) to buy the former Royal Mail Delivery Offices in central London for £111 million (S$225 million).
The JV is with Anchorage View, a company owned by Ong Beng Seng, the managing director and deemed controlling shareholder of Hotel Properties, and David Fu Kuo Chen, a non-executive director and deemed substantial shareholder of Hotel Properties.
The consideration is split into two tranches. The JV has paid £11.1 million (or 10 per cent of the purchase price) on signing the sale-and-purchase agreement. It will follow up with the remaining £99.9 million when the purchase of the property is completed - expected to be in December 2014.
The purchase price took into consideration the property's current market valuation and redevelopment potential. The JV is assessing the property's potential for residential and retail redevelopment, it said.
The property, formerly Royal Mail Delivery Offices, is located next to Paddington Station. A further payment of £20 million will be paid to the listed postal operator, Royal Mail Group, when the planning permission to develop the property has been granted.
According to Royal Mail's statement on the London Stock Exchange, it will additionally get half of any net sale proceeds above the £111 million price tag if the site is sold within the first year, or a quarter if it is sold in the second year.
The 0.45-hectare freehold site used to house Royal Mail's mail centre, sorting office and post office counter, but the postal group had vacated the premises in 2008 and relocated its operations to Mount Pleasant.
The site is one of Royal Mail's "surplus sites" which are no longer required for operations that the group has identified for potential sale or redevelopment to optimise value.
The postal operator went through a controversial privatisation, going from state-owned to publicly traded in October last year. Critics had argued that the £2 billion the government made from the sale undervalued the operator, given its prime London locations.
Earlier this month, Royal Mail also received planning approval from London Mayor Boris Johnson for parts of its Mount Pleasant sorting office in Farringdon to be turned into luxury apartments.
On the deal, OCBC Investment Research analyst Eli Lee said: "We are overall positive on Hotel Properties' acquisition - further diversifying its asset portfolio in terms of geographical exposure - which is particularly key in light of continued uncertainties in the Singapore residential space.
"The London residential sector is a well-established market attractive to international investors, and we believe this move represents a solid risk-reward proposition given the price paid and its location."
Hotel Properties will fund its share of the acquisition using third-party loan financing and internal resources.
Hotel Properties ended trading on Wednesday three cents lower at S$4.06.
