Private equity massive Blackstone can be understood to be stitches a deal to order a majority affinity for three Singapore properties owned or operated by Sime Darby. It is expected to take a stake of about 75 per cent in entities owning the properties; the deal values the properties at about S$300 million. The yield, on an ungeared basis, is estimated at 6 per cent.
Sime Darby, the listed Malaysian plantation-based conglomerate, is selling the properties to reduce debt.
The properties are Sime Darby Centre at 896 Dunearn Road; Sime Darby Enterprise Centre, a light industrial building along Jalan Kilang off Jalan Bukit Merah; and Sime Darby Business Centre at 315 Alexandra Road (next to IKEA).
Of these, the biggest ticket item is Sime Darby Centre – an office and retail development on freehold and 999-year leasehold land parcels zoned for commercial use and with 1 . 8 plot ratio (ratio of maximum gross floor area to land area).
Part of this property used to house a BMW showroom; today, some of Sime Darby’s Singapore offices are still located there but the retail-and-office building also has third-party tenants such as Scanteak, ToTT Cooking Studio and Cold Storage.
The other two properties are light industrial developments sitting on Business 1-zoned sites with 2 . 5 plot ratio; they are on sites with a balance lease of around 40 years.
Sime Darby’s other properties on the island include 303 Alexandra Road, also known as Sime Darby Performance Centre and where the main BMW showroom for new cars is located, and 280 Kampong Arang Road in the Mountbatten/Tanjong Rhu area, housing a showroom for second-hand BMWs. Sources say the combined value of these five assets could exceed S$500 million.
One property in the deal, the one beside Ikea in Alexandra Road, also has a second-hand BMW showroom.
Sime Darby unit Performance Motors distributes BMWs.
The three properties will be income-generating for Blackstone – as Sime entities occupying space there can be expected to let back space upon finishing the deal.
Writing comments on the a variety of divestment solutions that Sime Darby could possibly have considered, current market watchers shared with The Business Situations that supplied the inadequate equity areas, spinning away from the properties towards a real estate investment trust (Reit) might be challenging.
In order to a successful Reit IPO, Sime Darby have to divest the properties for less money to match, if perhaps not emulate, the current huge yields of which Reits are actually trading. A much more fundamental concern is that a good portfolio of your three real estate lacks increase for a Reit IPO.
Advertising the solutions to an existing Reit could also often be difficult seeing that Sime Darby’s pricing can be unlikely to generally be yield accretive for you.
For Blackstone, a potential get away strategy for the 3 properties frequently spruce these folks up, increase their importance and then offload them, maybe on a piecemeal basis. On the flip side, there could be a good scenario of acquiring even more properties to collect a bigger account for a possibilities Reit placement.
An industry onlooker said: “For the seller, buying one to sell a big part stake on three solutions to Blackstone is probably the easiest way – supplied current market circumstances. ”
On February, Sime Darby said it was going to raise RM1. 8 thousand (S$620 million) by reselling assets on Australia and Singapore. Web design manager and group chief executive Mohd Bakke Salleh said that the monetisation course would involve commercial and industrial real estate and that the provider had acknowledged as being 13 solutions in Queensland and some in Singapore.