CDL and Alpha Investment Partners in S$1.1 billion Singapore office venture via a new profit participation securities platform

  • Joint investment entity to acquire three of CDL’s prime office assets
  • Initiative is second in CDL’s Profit Participation Securities investment series

Located beside Bras Basah MRT station, Manulife Centre – an 11-storey office building with retail units on the ground floor – is one of the three prime office assets to be injected into the PPS platform.

Singapore, 15 December 2015 – City Developments Limited (CDL) has entered into an agreement with Alpha Investment Partners Limited (Alpha), through Alpha Asia Macro Trends Fund II (AAMTF II), to create a joint office investment platform via its second Profit Participation Securities (PPS) transaction that will acquire three of CDL’s prime office assets. Through this transaction, both CDL and AAMTF II will jointly invest in an office portfolio with a total value of approximately S$1.1 billion.

The three prime office assets to be acquired by the joint investment entity, Golden Crest Holdings Pte. Ltd., include:

Central Mall (Office Tower) – S$218.0 million

7 & 9 Tampines Grande – S$366.0 million

Manulife Centre – S$487.5 million

Alpha and CDL will co-finance the portfolio in the ratio of 60:40.

Investors in the PPS transaction will, in addition to a participation in asset divestment, be entitled to a fully secured fixed coupon payout of 5% interest per annum for a period of five years, in relation to a component of the PPS transaction involving the subscription of bonds. The transaction provides AAMTF II with preferred returns to an internal rate of return of 12.6% per annum, following which CDL will then receive all cash flows until its capital is fully repaid. Thereafter, further upside sharing will occur between AAMTF II and CDL in the proportion of 40:60 respectively.

The total aggregated value of the securities issued in the PPS transaction is S$333.5 million, comprising S$133.3 million of securities subscribed by Bestro Holdings Limited, a wholly-owned subsidiary of CDL and a contribution of S$200.2 million by AAMTF II. Concurrently, DBS Bank Ltd. and Oversea-Chinese Banking Corporation Limited will provide S$750.1 million in senior loan facilities.

CDL Executive Chairman Mr Kwek Leng Beng said, “We are pleased to partner Alpha in this landmark transaction. Over the past two years, we have been advancing our two-pronged diversification strategy of developing new overseas and investment platforms. By building on the success of our first PPS transaction last year, this new initiative allows us to recycle capital for our growth plans. In line with CDL’s long-term investment perspective, we are committed to realising the capital appreciation potential of our real estate assets. By partnering our co-investor Alpha in this new PPS platform, we continue to remain a substantial investor in these prime assets.”

Ms Christina Tan, Managing Director, Alpha, said, “We seek to enhance the performance of assets under AAMTF II through strategic portfolio planning to create value for our investors. The partnership with CDL allows us to invest in a portfolio of well-located office properties in Singapore with opportunities for rental reversions in the medium term. Moreover, the investment in the PPS platform offers a downside protection for AAMTF II with a guaranteed fixed coupon as well as preferred returns with further upside sharing thereafter, giving us the opportunity to participate in the upside potential of the office capital market.”

CDL will continue to manage the office asset portfolio which currently has a strong occupancy of 98%. Its high-quality and diversified tenant base comprises a good mix of large multinational corporations (MNCs), financial institutions, small medium enterprises (SMEs) as well as food and beverage (F&B) outlets, ensuring resilience across different market cycles.

This funds management initiative is CDL’s second PPS. Last year, it partnered with Blackstone’s Tactical Opportunities Fund and CIMB Bank Berhad, Labuan Offshore Branch for the S$1.5 billion PPS that invests in the cashflows of CDL’s upscale properties in Sentosa Cove, called the Quayside Collection.

Central Mall (Office Tower) is a 7-storey office building with retail units on the ground floor.

7 & 9 Tampines Grande comprises two 8-storey office blocks with retail units on the ground floor.