PROPERTY group OUE Ltd is looking to sell its office and retail development OUE Bayfront for at least $1 billion, to the commercial real estate investment trust that it is looking to list on the Singapore Exchange.
The sale consideration may comprise $696.9 million in cash, and units in OUE Commercial Real Estate Investment Trust (OUE C-Reit) that will amount to $308.1 million. This is assuming that OUE Bayfront is sold for the minimum price, OUE said in a circular to shareholders yesterday.
OUE Bayfront is one of two assets that will form the initial portfolio of OUE C-Reit. OUE had previously also said that it will inject the 50-year leasehold Lippo Plaza, which is located in Shanghai, into the Reit.
OUE's tenure for the 36-storey office and retail Lippo Plaza started in 1994. The building has a net lettable area (NLA) of 422,290 sq ft.
In its circular, OUE said that the Reit will also have first right of refusal to acquire three of OUE's commercial properties. These include the US Bank Tower in downtown Los Angeles which OUE snapped up earlier this year for US$367.5 million. Known as the tallest building in California, the US Bank Tower has a NLA of 1.4 million sq ft.
The other two properties are OUE's 40.8 per cent interest in office and retail development, One Raffles Place, which has an NLA of 862,001 sq ft, and OUE Downtown 2 and Downtown Gallery - which has an NLA of 603,016 sq ft.
OUE said that it expects to hold 40 per cent of units in OUE C-Reit. "Depending on the final offering structure, the group may hold up to 50 per cent of the units," it added.
Media reports quoting sources had said previously that OUE C-Reit could raise up to $700 million through its initial public offering in the first quarter of next year.
OUE will be holding an extraordinary general meeting (EGM) on Dec 4, 2013, for shareholders to vote on the sale of OUE Bayfront to OUE C-Reit.
The development has an overall NLA of 402,374 sq ft, with three components: the 99-year leasehold OUE Bayfront, which is an 18-storey premium office building with rooftop restaurant premises, and ancillary properties, 99-year leasehold OUE Tower - a conserved building currently occupied by a fine dining restaurant - OUE Link, a link bridge with retail units which has a 15-year leasehold title that started in 2010.
In FY2012, the property delivered net property income of $35.4 million.
Based on the valuation of OUE Bayfront by Cushman & Wakefield VHS as at Sept 30, 2013, the property is valued at $1.01 billion on an "as-is" basis and at $1.04 billion after taking into account income support.
The EGM will also see OUE put to vote a proposal to distribute to its shareholders one stapled trust it currently holds in its hospitality Reit, OUE H-Trust, for every six OUE shares held on the books closure date.
This will be done in proportion to stakeholders' shareholdings in OUE.
The distribution will hinge on whether shareholders pass the resolution to sell OUE Bayfront, it said.
"In the event that shareholders do not approve Resolution 1 (the sale of OUE Bayfront), the company will not proceed with Resolution 2 (the distribution of OUE H-Trust stapled securities).
"Should the shareholders not vote in favour of the proposed disposal, the company will not be able to avail itself of the cash proceeds, and may have to find other means of raising the same funds, including selling the company-held OUE H-Trust stapled securities instead of distributing them to shareholders."
Part of the proceeds raised from the OUE Bayfront sale will go towards paying down debt of US$376.6 million.
If both resolutions pass, OUE's proposed distribution of OUE H-Trust stapled securities will amount to about $133.5 million, based on 151.7 million company-held OUE H-Trust stapled securities valued at 88 cents each.
This translates into a dividend of about 15 cents per share - based on the total number of issued shares in OUE, said the group.
The distribution represents about 25.6 per cent of the stapled securities OUE holds in its hospitality Reit, OUE H-Trust. This is about 11.6 per cent of the total number of stapled securities in OUE H-Trust.
OUE "intends to retain approximately 33 to 35 per cent of the total number of OUE H-Trust stapled securities in issue" after the distribution, it added.
Source: Business Times, 21 Nov 2013