Perennial, SPH consortium to sell half stake in AXA Tower to Alibaba

Singapore

A CONSORTIUM led by Perennial Real Estate will divest a half stake in Grade A office building AXA Tower to a subsidiary of Chinese e-commerce giant Alibaba Group Holding.

The consortium will also transfer half of an outstanding shareholders' loan to the subsidiary, Alibaba Singapore, Perennial Real Estate said on Wednesday without disclosing the size of the loan.

The consideration payable for the 50 per cent equity interest will be calculated based on the net asset value of Perennial Shenton Holding Pte Ltd (PSHPL) - which indirectly owns AXA Tower - at the deal's close, and based on an agreed property value of S$1.68 billion.

Meanwhile, the consideration for the loan will be 50 per cent of the principal outstanding as at closing.

Once the sales and purchase agreement is executed, a deposit of S$16 million will be paid into an escrow account retained by the consortium. The balance consideration for the sale shares and loan will be paid in cash when the final amount has been decided.

Alibaba Singapore is an anchor tenant at the property.

Singapore Press Holdings (SPH), HPRY Holdings and Piermont Holdings are among the investors in the consortium, which is named Perennial Shenton Investors (PSI).

Perennial Real Estate, which indirectly owns an effective 31.2 per cent stake in AXA Tower, said its share of the net proceeds from the transaction will be about S$196.4 million. Its share of the divestment gain is approximately S$45 million.

In a separate filing, SPH said it will receive about S$33.2 million for selling its 5.29 per cent interest in the property, held through its wholly-owned subsidiary PE One.

At the same time, the remaining half share in PSHPL as well as the other half of the loan will be transferred to a new consortium, PRE 13, that has been formed with the same investors in the initial PSI consortium.

Perennial Real Estate will indirectly own 20 per cent of shares in PRE 13 and an effective 10 per cent stake in AXA Tower. Balance proceeds for Perennial Real Estate, after reinvesting into the new consortium, is expected to be about S$137.6 million.

SPH said PE One will reinvest S$5.9 million for a 2 per cent interest in the new consortium, which translates to a 1 per cent effective stake in the property. In 2015, PE One forked out S$19.3 million to purchase the 5.29 per cent stake in AXA Tower.

Both the sale to Alibaba and the share transfer to the new consortium are expected to complete in June, subject to the conditions precedent being satisfied.

After that, PRE 13 and Alibaba Singapore will create a joint venture to redevelop AXA Tower.

The 50-storey office development with a retail podium is located in Singapore's central business district (CBD). It has an existing total net lettable area of approximately 674,000 square feet (sq ft). Based on the agreed property price of S$1.68 billion, the transaction works out to about S$2,493 per sq ft.

AXA Tower has secured an approved uplift in its gross plot ratio, based on the Urban Redevelopment Authority's Master Plan 2019. This will increase its gross floor area (GFA) to about 1.24 million sq ft, from the existing 1.05 million square feet sq ft, Perennial Real Estate said.

It has also obtained approval to further increase the GFA to 1.55 million sq ft, if the redevelopment integrates hotel and residential use under the CBD Incentive Scheme.

Perennial Real Estate chief executive officer Pua Seck Guan noted that the divestment aligns with the company's capital recycling strategy while retaining its involvement to create value via the redevelopment of the prime property.

SPH CEO Ng Yat Chung said: "We continue to take a disciplined approach in reviewing our non-core businesses and investments."

"The sale is in line with SPH's prudent capital management and capital recycling strategy which allows us to redeploy the proceeds into our core businesses to create shareholder value," Mr Ng added.

The divestment will not have a material impact on SPH's earnings or net tangible assets for the financial year ending Aug 31, 2020. The media and property group publishes The Business Times.

SPH shares closed at S$1.60 on Wednesday, up S$0.09 or 6 per cent, while Perennial Real Estate shares fell 0.5 cent or 1 per cent to S$0.50.