Oxley confirms S$1.025b sale of Chevron House

[reporter2]

Oxley confirms S$1.025b sale of Chevron House

Wed, May 01, 2019


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.

[reporter2]

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

But Oxley says building still undergoing works and was sold with no tenancy agreements

Fri, May 03, 2019


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.