Vibrant to enter S$227.5m sale and leaseback deal for Jurong Island property

VIBRANT Group's 51 per cent owned subsidiary, LTH Logistics (Singapore), has entered a conditional put and call option agreement with SGRE Banyan for the proposed sale and leaseback of a Jurong Island property, and related mechanical and electrical equipment, with a sale consideration of S$227.5 million, the group announced on Tuesday night.

CBRE, which brokered the deal, said this would mark Jurong Island's first sale-and-leaseback transaction and first securitised asset.

The property at 121 Banyan Drive comprises two plots of land with a six-storey ramp-up warehouse facility with ancillary offices, two blocks of single-storey warehouse and an open yard. It is used by LTH Logistics for its logistics business.

With a gross floor area (GFA) of 65,764 square metres (sq m) and a site area of 43,142 sq m, the property has been valued by CBRE at S$210 million, taking into consideration the proposed sale and leaseback agreement, and an upfront capex payment of S$17.1 million.

After either LTH Logistics exercises its put option or SGRE Banyan exercises its call option, the parties will be deemed to have entered a sale and purchase agreement. On completion of the sale, the parties will also enter into a lease agreement under which LTH Logistics will occupy the entire GFA of the property for 10 years as a tenant. Its total rent payable for the first year will be S$15.3 million, rising 1.75 per cent each year from the second year of the lease, with LTH being entitled to a 12-month rent free period of six months each in the fifth and 10th years of the lease.

The exercising of the put or call options are subject to conditions such as obtaining approval from JTC Corporation, which is leasing both plots of land to LTH Logistics, and shareholder approval. One plot has a leasehold interest of 30 years from Sept 8, 2011, with a further term of 29 years three months and 22 days to be granted by JTC, while the other has a leasehold interest for 29 years eight months and nine days from Dec 30, 2011, and a further term of 29 years three months and 22 days to be granted by JTC.

The transaction is expected to be completed in the first half of 2019. Vibrant said the deal would let it "realise the fair value of its investments in the property", while enabling it to enjoy long-term use for existing operations through the leaseback agreement. Vibrant intends to use the net proceeds to reduce debt, expand its main businesses, and for working capital.

Based on the group's audited consolidated accounts for the recently completed 2018 financial year, the property's net asset value including plant and equipment is about S$119.6 million, the gain on the proposed sale would be about S$23.7 million, and the excess of net proceeds over net asset value would be about S$89.1 million.