Saturday, July 17, 2010

Frasers Centrepoint buys StarHub Centre for $380m

CapitaCommercial Trust will book a net gain of about $109.1m from the divestment

FRASERS Centrepoint Ltd has inked a deal to buy StarHub Centre at Cuppage Road for $380 million from CapitaCommercial Trust (CCT).

CCT will book a net gain of about $109.1 million from the divestment. The transaction price is 42.5 per cent or $113.3 million above the asset's latest valuation of $266.7 million at June 30, 2010.

CB Richard Ellis brokered the sale of StarHub Centre.

Frasers Centrepoint CEO Lim Ee Seng said that StarHub Centre has 'great redevelopment potential for a high-end mixed residential and retail development'. The asset will continue to be leased out as an office/retail property until such time as redevelopment options and designs are firmed up by the company, and planning approvals are obtained, Mr Lim added.

The group's Centrepoint Shopping Centre already has a second-storey link bridge to StarHub Centre and a new project on the StarHub site will better integrate the two properties, market watchers say.

The sale by CCT will provide it with net proceeds of about $375.8 million - after taking into account divestment fee and other related costs - which will provide the trust with greater financial flexibility to pursue other attractive acquisition opportunities and/or to repay debt, the trust's manager, CapitaCommercial Trust Management Ltd (CCTML) said.

It also revealed that on July 13 it received in-principle approval from Singapore Land Authority (SLA) for a top-up of the StarHub Centre site's lease to 99 years. The site currently has a balance lease term of about 85 years. However, the lease upgrading premium payable to the state will be determined upon formal application.

In January, Urban Redevelopment Authority granted outline planning permission (OPP) for a change of the site's use, from pure commercial use currently - to a residential (60-80 per cent of gross floor area or GFA) and commercial use (20-40 per cent of GFA). However, the current gross plot ratio of 4.9+ remains unchanged.

'After evaluating various asset options and Singapore's property market conditions, the manager believes that the property has reached its optimal stage of life cycle as an office building. However, as CCT's focus is mainly in the office sector, the manager is of the view that CCT should not participate, whether solely or on a joint-venture basis, in the redevelopment of the property into a predominantly residential project and expose CCT to undue residential development and market risks.

'Hence, the manager considers that the best option to unlock the maximum value of the asset for CCT is to divest it to another party for potential redevelopment,' CCT's manager said.

It also stressed that the sale to Frasers Centrepoint is not subject to any additional planning or redevelopment approval of any kind being obtained, following the OPP. It is also not a condition of the sale that CCT fulfils the conditions of the in-principle lease upgrade approval from SLA.

CCT also explained the process of picking the buyer.

'After an exercise to gather formal expressions of interest from a long list of prospective bidders to purchase the property, the sale of the property was conducted by way of a private tender with the parties which had expressed an interest to purchase the property. The purchaser was one of the bidders which offered to purchase the property and whose offer and terms for the purchase (a) did not introduce any new provisions which would give rise to the right of the purchaser to rescind the purchase, thus offering more certainty in the completion of the sale, and (b) met most closely with the requirements of the manager and the trustee,' CCTML said.

Frasers Centrepoint said the acquisition of StarHub Centre will boost its landbank to 2.2 million square feet.

Source: Business Times, 17 Jul 2010

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