Teo Tong Lim's family office, Roxy-Pacific to acquire Melbourne office tower for A$145m

Co-owned TE Skyhigh Trust to be acquiring entity under agreement

Wed, Jul 08, 2020

Fiona Lam


MAINBOARD-LISTED property developer Roxy-Pacific Holdings and the private family office of Teo Tong Lim have joined hands to acquire a Melbourne office building for A$145 million (S$140.8 million).

Roxy-Pacific on Tuesday announced it had invested in a 40 per cent stake in Singapore master trust TE-Roxy Commercial Trust I at a committed capital of A$27 million, which will be financed by internal funds.

The other 60 per cent interest in TE-Roxy is held by Mr Teo's family office, TE2 Group.

Mr Teo is the managing director of property developer and investment house Tong Eng Group, which is well known in the Melbourne market.

TE-Roxy will hold the entire interest in a Singapore firm TECT I. In turn, TE-Roxy and TECT I will together wholly own Australian head trust TE Australian Trust I and Australian sub-trust TE Skyhigh Trust.

Roxy-Pacific's subsidiary, Roxy Australia Capital, will enter into an agreement with TE2 Group and other parties to govern the rights and obligations of each investor in relation to the units in the trusts.

The trusts were set up to establish an incorporated joint venture (JV) with the objective of acquiring the building at 350 Queen Street in Melbourne. A sale and purchase agreement to buy the property for A$145 million, not including stamp duty and due diligence costs, has been signed.

Under the agreement, TE Skyhigh Trust will be the acquiring entity. The proposed property acquisition is subject to conditions including TE Skyhigh Trust obtaining approval from Australia's Foreign Investment Review Board.

Roxy-Pacific said that the purchase price was arrived at after taking into account commercial factors such as the location of the property and the recent transacted prices for other properties in the vicinity.

The Australian Financial Review (AFR) reported on Tuesday morning that the acquisition was agreed on an initial yield of 4.8 per cent, which is considered a relatively tight yield for a B-grade building in a market with increased leasing risk amid the novel coronavirus pandemic.

"We are pleased to expand our commercial footprint in Australia and are sanguine that the robust fundamentals in the Melbourne central business district's commercial sector will allow buildings to be poised for rental and capital growth," TE Capital's managing director Terence Teo told AFR.

TE Capital was founded by Mr Terence Teo and Emilia Teo, who are third-generation family members of Tong Eng Group.

The buyers plan to pursue a 12-month refurbishment programme for the property, which was built in the 1980s, AFR reported.

Situated in Melbourne's central business district, the tower houses offices, retail offerings, and community amenities. It has a freehold tenure with a total site area of 1,787 square metres (sq m) and a net lettable area of 21,914 sq m.

The proposed property acquisition will be financed by internal funds and bank financing taken out by the trusts, Roxy-Pacific said.

The company noted that its investment into TE-Roxy, the JV and the proposed acquisition are all in its ordinary course of business.

The potential deal was announced before Australia's Victoria state started a six-week lockdown in metropolitan Melbourne and one regional area of the state.

After a record daily rise in Covid-19 infections, State Premier Daniel Andrews said on Tuesday afternoon that the state will reimpose stay-at-home restrictions starting Wednesday midnight, in which people must stay home except for work, essential services, medical treatment or school.

Shares of Roxy-Pacific fell 0.5 Singapore cent or 1.5 per cent to close at 34 cents on Tuesday.