Straits Trading unit joins consortium to buy Shanghai mall

MAINBOARD-LISTED The Straits Trading Company has joined a consortium to buy a shopping centre in Shanghai for 2.42 billion yuan (S$468.9 million), the board disclosed on Tuesday.

SRE Venture 16 (SREV16), its wholly-owned subsidiary, will be joining forces with a unit of a fund managed by ICBC International Investment Management and a subsidiary of ARA Asset Management, a real assets fund manager in which Straits Trading owns a 20.95 per cent stake.

With SREV16 pledging to take a 37.7 per cent interest in the joint venture, Straits Trading will cough up 441.9 million yuan - to be funded out of internal resources - for its share of the deal for the Sanlin InCity mall in the Sanlin district of Pudong.

Straits Trading said that the planned purchase of the mall - which it said is 91.3 per cent occupied and has about 83,100 square metres of gross floor area - is in line with the company's strategy of "redeploying capital from its existing property portfolio of high-quality but low-yielding investment properties into potentially higher-return real estate opportunities".

Meanwhile, David Kim, the acting chief executive of ARA Private Funds, said that "we have studied the property and are ready to execute our asset enhancement and repositioning plans upon completion of the deal", which is expected to be in early-2020.

Sanlin InCity was most recently renovated and reopened in late-2018. Noting that ARA also bought Chengdu mall The Atrium in a joint venture with a China International Capital Corporation fund in June this year, Mr Kim cited "our positive outlook on commercial real estate in China", thanks to middle-class consumption and stabilising competition faced by brick-and-mortar retailers from e-commerce.

The price tag for the Sanlin InCity transaction, which was reached after arm's length negotiations on a willing buyer, willing seller basis, takes into account the property's value of 2.66 billion as at Aug 31, according to a CBRE valuation commissioned by the purchasing consortium.

The deal is not expected to have a material impact on the earnings and net tangible asset per share of Straits Trading for its financial year to Dec 31, the board said in its announcement.

Straits Trading shares closed flat at S$2.09 on Tuesday before the announcement.