Chevron House

Oxley's Chevron House sale a better deal for buyer than seller: DBS analysts

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ANALYSTS at DBS Group Research are of the view that the "buyer is the bigger beneficiary" in Oxley Holdings' deal to sell Chevron House for S$1.025 billion, although Oxley and some industry sources disagree.

The sale comes just 16 months after the debt-laden property developer acquired the 32-storey office tower in Raffles Place for S$660 million in December 2017. Oxley has agreed to sell the property to Golden Compass, a wholly-owned unit of US-based real estate fund AEW.

"Based on the available information and our ballpark estimates, we believe the buyer is the bigger beneficiary of this transaction by acquiring the office component of Chevron House at below 4 per cent cap rates, with reversionary potential close to 5 per cent cap rates.

"This has yet to factor in any potential plot ratio upside from the government schemes to incentivise the redevelopment of the Central Business District," DBS analysts Rachel Tan and Derek Tan wrote in a research note on Thursday morning.

The cap rate is the rate of return on an investment property based on the income it is expected to generate.

In response to the analysts' comments, an external spokesman for Oxley said it would not be fair to compare this sale to that of a completed building, seeing as Chevron House still has ongoing alterations, additions and asset enhancement works.

"Also, the building was sold with no tenancy agreements, so it will be up to the buyer to source for tenants," the spokesman told The Business Times on Thursday evening.

"Many developers in the market are saying that Oxley got a great deal by selling a building just based on drawings."

Under the sale-and-purchase agreement, after Oxley receives an initial S$210 million, it is to complete the works and also divest the retail and banking units before the buyer will pay the balance of the consideration and discharge the bank loans.

An industry source who declined to be named said: "Oxley managed to sell it for a handsome profit to shareholders in such a short time, despite the incomplete construction and zero tenancy agreement.

"This could potentially go down as the deal of the year."

The DBS analysts said the initial cash proceeds of S$210 million will facilitate Oxley's repayment of its first tranche of retail bonds of S$300 million expiring on Nov 5, though certain deal terms have not been revealed.

"The devil is in the details, but the terms attached between Oxley and the buyer with regard to the divestment of the retail and banking units, and any other terms and conditions are not made known," they said.

"If we assume that the first tranche of payment is potentially the maximum gain or cash proceeds to be received by Oxley for the sale, we believe the cash received will alleviate some of Oxley's urgent cash requirements, though not completely."

BT understands that the initial S$210 million payment will be the maximum cash proceeds Oxley will receive under the deal.

"There will be further deleveraging when the buyer assumes Chevron House's bank loans upon completion of the transaction when conditions are met," the analysts added.

BT reported on May 1 that the buyer will take over the S$450 million in borrowings which Oxley had taken out to finance its 2017 acquisition of Chevron House. The sale will thus reduce Oxley's debt by that amount.

Oxley has two tranches of retail bonds maturing soon: S$300 million due on Nov 5, 2019, and S$150 million due on May 18, 2020.

It also has S$238 million of corporate borrowings expiring in fiscal 2020/2021, and S$631 million of euro medium-term notes expiring in fiscal 2021/2022.

Oxley shares closed at S$0.32 on Thursday, down 0.5 Singapore cent.

Source: Business Times, 3 May 2019

Oxley confirms S$1.025b sale of Chevron House

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PROPERTY developer Oxley Holdings announced on Tuesday that it had signed a deal to sell Chevron House for up to S$1.025 billion, just 16 months after acquiring the prime office building in Raffles Place for S$660 million.

Oxley said that on April 29, it entered into a sale-and-purchase agreement (SPA) with Golden Compass (BVI) for the latter to buy the entire interest in its wholly-owned subsidiary Oxley Beryl, and take over the existing bank loans for an aggregate value of up to S$1.025 billion.

Oxley Beryl owns Chevron House, a 32-storey commercial development comprising 27 levels of office space and a five-storey retail podium; the building's existing net lettable floor area (NLA) is about 261,280 sq ft.

Oxley's corporate presentation in February revealed that the plan is to increase the building's NLA by 43 per cent to about 374,165 sq ft, subject to approval from the authorities.

The S$1.025 billion sale price works out to about S$2,739.43 psf on the increased NLA. The property sits on a site with a 99-year leasehold tenure from December 1989, leaving nearly 70 years on the lease.

Oxley said the proposed sale is expected to have a positive impact on its net tangible assets per share and earnings per share for the current financial year ending June 30.

It will complete the alterations, additions and asset enhancement works, begun on March 1 on the property, before the final completion of the proposed sale.

The consideration was arrived at through arm's-length negotiations, taking into account the enterprise value of Oxley Beryl, said Oxley.

Under the deal, Golden Compass is to pay S$210 million upon the first completion of the proposed sale, after which 82.35 per cent of the issued and paid-up capital of Oxley Beryl, among others, will be transferred to Golden Compass.

The buyer is to then pay the balance of the consideration and discharge Oxley Beryl's bank loans upon the final completion of the sale, after which the remaining shares in Oxley Beryl will be transferred to Golden Compass. The final completion will take place after the works are done and after the retail and banking units there have been divested.

The Business Times understands that the buyer will take over the S$450 million in borrowings that Oxley had taken out to finance its 2017 acquisition of Chevron House. The sale will thus reduce Oxley's debt by that amount.

The SPA also provides for certain retention sums which will be released when the relevant conditions are fulfilled. Oxley did not disclose these sums or conditions.

Completion of the proposed sale is subject to certain conditions precedent, including shareholders' approval if required by the Singapore Exchange (SGX).

Golden Compass is wholly-owned by the US-based real estate fund AEW. BT had reported in March that Oxley had accepted an expression of interest from AEW to acquire Chevron House.

As one of Singapore's most highly-geared developers, Oxley has been in deleveraging mode of late. It told BT in March that it aims to gradually reduce its net gearing to one time by end-2019, from 2.55 times net debt-to-equity as at end-2018.

It has S$300 million in bonds due in November 2019 and S$150 million in bonds maturing in May 2020.

To pare down its debts, Oxley is focused on selling assets and a quick turnover for completed projects.

In Singapore, aside from Chevron House, it is also looking to sell its Novotel and Mercure hotels on Stevens Road. Oxley has hired exclusive agents to sell the hotels, after having called off a S$950 million sale in March. The company has received interest for the hotels from parties in Hong Kong, BT understands.

Oxley shares closed at S$0.33, up three Singapore cents on Tuesday.

Source: Business Times, 6 May 2019

Many ways for Oxley to exit its Chevron House investment

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SINCE the start of this year, Oxley has unveiled a few divestments. On Jan 21, the group announced the sale of two offices blocks (Blocks 4 and 5) of its Dublin Landings project in Ireland for a total of 204 million euros (or S$315 million). This was followed by the announcement on Jan 28 of a proposed sale in parts of two residential blocks (Blocks B and E) in the same development for 175.5 million euros.

Earlier in the same month, on Jan 10, Oxley revealed that it had accepted a non-binding letter of intent for the purchase of the Mercure and Novotel hotels along Stevens Road for S$950 million.

Completion of the above transactions is expected to help Oxley - one of the most highly geared property groups listed on the Singapore bourse - to lower its net gearing ratio to about two times from the high of 2.55 times as at Dec 31, 2018.

Word on the street is that its stake in Chevron House, an office-and-retail development next to Raffles Place MRT Station, may be a further candidate for divestment.

However, things are still fluid, with a few permutations of a potential exit mulled over the past year for Chevron House, which has an eye-catching design, including office floors that have a circular shape at one end.

Oxley has owned Chevron House for about a year. It entered into a deal in December 2017 to buy the 32-storey building from Deka Singapore, a unit of Germany's DekaBank Group, for S$660 million, and completed the transaction in March 2018.

When the building was being marketed in the second half of 2017, it had been pitched, among other things, for potential asset enhancement and strata sale exit.

Word in the market is that Oxley last year courted some potential tenants to lease space in the building after it has been revamped; the group also tried to interest potential investors to buy strata floors with the proposition of secured tenancies and assured recurring income.

Let's look at the scope of potential works for the asset, which was previously known as Caltex House and completed in 1993. The building has a total net lettable area (NLA) of about 261,280 sq ft - comprising 215,667 sq ft of offices over 27 floors (from levels 6 to 32) and 45,613 sq ft of retail space on five floors (from basement 1 to level 4).

Basements 2 and 3 house car park lots.

The development has unutilised gross floor area (GFA) of about 15,000 sq ft which may potentially be accommodated in the retail podium, based on earlier reports. The lettable space on office floors will go up due to renovations including relocation of mechanical and electrical equipment.

Some of the basement car park space is expected to be converted to lettable area and this is expected to be occupied by a gym/fitness operator.

A few F&B tenants are also said to have signed up.

There has been speculation that Oxley is in advanced negotiations to lease multiple floors to WeWork post-refurbishment. By some accounts, WeWork could take up eight office floors.

According to market talk, a combination of whole-floor tenancies and renovation works is expected to boost Chevron House's efficiency (ratio of NLA to GFA) from about 65 per cent to 80 per cent. A slide in Oxley's corporate presentation last month shows that the plan is for the building's NLA to increase by 43 per cent to about 374,165 sq ft, subject to approval from the authorities.

BT understands that Oxley began serving notice to tenants in the third quarter of last year to vacate Chevron House. The building is now empty. (Anchor tenant Chevron moved to Duo Tower last year; it had negotiated its lease in the iconic Beach Road project even before Oxley bought Chevron House in Raffles Place).

Preparatory works for Chevron House's refurbishment are under way and the spruce-up is expected to be completed in about a year's time.

While Oxley may have begun exploring its exit for this asset through potential strata sales, probably on a one-title-per-floor basis, it turns out that some potential investors may have provided feedback to Oxley that they are more keen on buying the whole building.

The touted price tag of about S$1 billion works out to about S$2,670 psf on the increased NLA of about 374,165 sq ft.

No doubt, Chevron House has a prime location in the traditional Raffles Place CBD. However, it is on a site with 99-year leasehold tenure since December 1989, leaving nearly 70 years' balance lease - compared with freehold and 999-year leasehold tenures for most of the surrounding buildings.

Will Oxley proceed with its strata sale strategy? Perhaps the group may be more inclined to sell a stake in the property to a like-minded partner and thus retain a share in any further upside. That said, if an attractive offer surfaces, who knows if the group may just divest the entire building on a turnkey basis.

As the old saying goes: There is more than one way to skin a cat.

Source: Business Times, 7 Mar 2019

Oxley acquires Chevron House, property developer Centra Cove

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SINGAPORE - Oxley Holdings announced on Thursday (Dec 14) it has entered into sale and purchase agreements to buy Raffles Place office building Chevron House for S$660 million, as well as Singapore property developer and investment holding company Centra Cove for a cash consideration of US$12 million (S$16.2 million).

Deka Singapore A Pte Ltd has sold Chevron House, a 32-storey commercial development with 27 levels of office space and a five-storey retail podium, with a net lettable floor area of 24,273 sq m.

Oxley intends to renovate the commercially zoned site, which has a land area of 2,777.9 sq m.

A deposit of S$33 million and Goods and Services Tax (GST) have been paid to the vendor and the vendor's solicitors respectively, with the balance of the purchase price with any applicable GST payable upon completion of the acquisition on March 29, 2018.

The acquisition is financed through internal resources and bank borrowings, and Oxley expects it to have no impact on its financials.

Separately, Oxley announced it is acquiring Centra Cove from unrelated third parties Phuong Tuan Long and Teou Chun Tong Jason.

Centra Cove holds 75 per cent of the licensed charter capital of Vietnamese company Phu Thinh Land (PT Land), of which 16.81 per cent of the charter capital has been paid up.

With the purchase, Oxley will have a stake in and co-develop a residential project in Dong Nai province in Vietnam with a state-owned construction company.

The consideration of around S$16.2 million was arrived at through arm's length negotiations after Oxley's assessment of the project's potential value.

The vendors were paid US$5.63 million prior to the purchase agreement on Dec 13, with the balance to be paid upon the fulfilment of certain conditions. The purchase is funded by internally generated funds and bank borrowings.

Source: Straits Times, 14 Dec 2017

Oxley confirms talks to buy Chevron House

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OXLEY Holdings has confirmed that it is negotiating to buy the Chevron House building in Singapore's financial district.

Oxley, a property developer, said in an announcement before the market opened on Monday that it is in the process of conducting due diligence, and no definitive agreement has been executed yet.

The company made those comments in response to a Business Times article on Nov 24 saying that Oxley was in the advanced stages of buying the 32-storey office and retail building from a fund managed by Deka Immobilien of Germany.

The purchase price, according to the article, was expected to be around S$660 million, or S$2,526 per square foot of net lettable area.

Chevron House has 261,280 sq ft of net lettable area on a 29,891 sq ft site. It has 71 years remaining on a 99-year leasehold that started in December 1989.

Trading in Oxley shares resumed on Monday morning after the counter was halted on Friday following the publication of the article. The stock closed at 62.5 Singapore cents on Monday evening.

Source: Business Times, 28 Nov 2017

Oxley close to buying Chevron House

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Price believed to be around S$660m, working out to S$2,526 psf on existing net lettable area

OXLEY Holdings is in the advanced stages of stitching up a deal to buy Chevron House in Raffles Place.

The price is believed to be around S$660 million or S$2,526 per square foot on the property's existing net lettable area (NLA) of 261,280 sq ft.

The 32-storey office and retail development is on a 29,891 sq ft site with a 99-year tenure starting from Dec 7, 1989. This leaves 71 years on the clock.

The property is being sold by a fund managed by Deka Immobilien of Germany.

Chevron House has 215,667 sq ft NLA of offices over 27 floors (from levels 6 to 32) and 45,613 sq ft of retail space (basement 1 to level 4). There are 96 carpark lots in basements 2 and 3.

The property, completed in 1993, has basement connection to the Raffles Place MRT Station next door.

It is about 98 per cent let currently.

Anchor tenant Chevron, which occupies about 83,000 sq ft over 10 office floors, is expected to move to Duo Tower in the Beach Road/Ophir Road area, where it has signed up for about 73,000 sq ft.

The smaller space the oil major is leasing there reflects the more efficient space usage at Duo Tower due to bigger floor-plates. Duo Tower received its Temporary Occupation Permit late last year.

At Chevron House, the lease for the majority of the space that Chevron is currently leasing expires in late 2020, but observers say there may be provisions for the group to give up the space in 2019.

Going by Oxley's past moves, the property group might refurbish Chevron House and seek approval to strata-title the office and retail units for sale.

When expressions of interest for Chevron House were launched on Aug 1, marketing agents CBRE and JLL highlighted the asset enhancement potential of the development.

Office common areas including the entrance lobby, lift lobbies and toilets could be spruced up. In addition, about 14,950 sq ft of unused gross floor area could be made better use of in the retail podium, subject to approval; no differential premium would be payable to the state.

However, some observers say selling strata units in Chevron House may not be an attractive option as there may be hardly any margin left for Oxley based on its purchase price and after factoring in the refurbishment cost.

"Selling strata offices is challenging, but selling strata retail units in the project may be viable," said the head honcho of a property investment group.

On the other hand, some observers suggest Oxley could consider retaining the building, or at least part of it, as an investment property for rental income. This will help the group build up a source of recurring income.

Deka Immobilien, a unit of Germany's DekaBank Group, bought Chevron House for about S$547 million or S$2,083 psf on NLA from Goldman Sachs funds in 2010.

Goldman Sachs incurred a loss, having paid S$730 million or S$2,780 psf for it in 2007 during the property boom before the global financial crisis.

Chevron House is Deka's only major Singapore property.

According to data compiled by CBRE Research, about S$8 billion of office investment sales have been sealed year-to-date (as at Nov 22). The biggest transaction is the S$2.094 billion sale of the office and retail space in Asia Square Tower 2 by BlackRock Asia Property Fund III to CapitaLand Commercial Trust.

Mainboard-listed Oxley Holdings, headed by Ching Chiat Kwong, has been on a property buying spree this year, picking up, among other things, Mayfair Gardens off Dunearn Road for S$311 million and 231 Pasir Panjang Road at S$121 million.

It is a member of the consortiums that acquired two former HUDC sites - Serangoon Ville at S$499 million and Rio Casa in Hougang for S$575 million.

Source: Business Times, 24 Nov 2017

Chevron House owner said to be seeking buyer

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Source says German owner Deka could get S$700m for it

DEKA Immobilien GmbH, a unit of Germany's DekaBank Group, is putting up an office building for sale in Singapore's central business district, according to a person familiar with the matter.

The tower, Chevron House, could fetch about S$700 million, said the person, who asked not to be identified because the sale process is private. Deka acquired the property for around US$420 million in 2010 from a property fund managed by Goldman Sachs Group Inc, the company said at the time.

The sale of the building follows a flurry of activity in Singapore's commercial property market since last year. A Malaysian-led group bid S$2.6 billion in 2016 for a rare site in Singapore's Marina Bay district, while Qatar's sovereign wealth fund acquired an office building from BlackRock Inc for a record S$3.4 billion last year.

Blackstone Group LP earlier this year sold its Sime Darby Centre in Singapore's Bukit Timah area, for S$365 million to Singapore developer Tuan Sing Holdings Ltd.

"Now is a window of opportunity available for owners to recycle capital given evidence of rents firming up in prime office buildings, albeit at a cyclical low, and continued strong liquidity," said Priyaranjan Kumar, regional executive director of capital markets at Cushman & Wakefield Inc in Singapore.

A Deka spokesman said the Singapore building is the only one the firm owns in the Asian city-state, while declining to comment further.

The Chevron House, a high-rise skyscraper in Singapore's Raffles Place, houses tenants such as Chevron Corp's Singapore unit.

The 262,650 square foot building comprises a four-storey retail podium with a basement that links directly to the Raffles Place train station and a 29-storey office tower. BLOOMBERG

Source: Business Times, 8 Jul 2017