THE Straits Trading Company is selling its office tower, Straits Trading Building, to Singapore-based Sun Venture Group for S$450 million.
The announcement of the sale agreement on Friday came shortly after BT first broke news of an impending sale of the Battery Road property. BT had reported that the building owner was in advanced discussions on the sale of the building for a price of slightly above S$2,800 per square foot (psf) which, at a net lettable area of about 159,000-plus sq ft, had worked out to a price tag of S$450 million for the 999-year leasehold building.
The sale announced on Friday is part of Straits Trading's move to reallocate capital from its portfolio of investment properties which are high in quality but low in yield to "potentially higher return real estate opportunities", the company said.
"The monetisation of the Straits Trading Building is a significant step to unlock value from our property assets and transform our real-estate business into an engine of growth," said Chew Gek Khim, executive chairman of Straits Trading. "In redeploying the proceeds, we will be able to pursue a wider spectrum of value-accretive real-estate opportunities and also further the development of our real estate ecosystem."
The buyer, Sun Venture, is a real-estate developer and investor with a portfolio of commercial assets that include an office building at 50 Scotts Road, four floors at Samsung Hub, Westgate Tower and Paya Lebar Square.
Market watchers, commenting on the BT report, had said that the pricing of some S$2,800 psf would be the highest that an office block had fetched in six years since the record S$3,125 psf reached for 71 Robinson Road in April 2008, while it was still under construction.
From this sale, Straits Trading is expected to realise an estimated capital gain of S$39 million, based on the building's latest book value of S$405 million as at June 30, 2014. Based on a historical cost of S$70.6 million, the gain to the group will be S$373.3 million, it said.
In its Friday announcement, Straits Trading also cited an independent valuation report by DTZ Debenham Tie Leung (SEA) Pte Ltd that valued the building at S$410 million as at Aug 31, 2014, on an open market basis.
Straits Developments Private Limited (SDPL), a unit of Straits Trading, has undertaken to Sun Venture that when the deal is completed, the rent and service charge that the property's tenants and licensees have to pay as at March 1, 2015, will not be less than S$1.5 million monthly. If the sum does fall short, SDPL will have to top up the difference.
SDPL currently occupies the office premises on the building's 28th floor. The building's buyer will lease the office space back to SDPL from the date that the deal is completed, up to Dec 31, 2016, with a further one-year option for renewal.
The transaction, slated to be completed by Dec 18, 2014, is conditional on shareholders' approval at an extraordinary general meeting, among other things.
According to a Straits Trading announcement last week, filed in response to the BT article about the building's impending sale, the company had told shareholders during its annual general meeting in April that it intended to "maximise yield, and divest non-core assets and redeploy capital".
In the area of real estate, Straits Trading has an 89.5 per cent stake in Straits Real Estate Pte Ltd, a 20.1 per cent interest in ARA Asset Management Ltd, and holds an aggregate interest of 5.8 per cent in Suntec Reit.
Straits Trading's counter closed one cent higher at S$2.91 on Friday.
Source: Business Times, 6 Sep 2014