SINGAPORE (Apr 16): Perennial Real Estate Holdings (PREH) has divested its entire 30% stake in Perennial Somerset Investors (PSIPL) to its 70% shareholder, Simply Swift, for a total consideration of $155.1 million.

PSIPL owns 111 Somerset, a prime integrated development in Orchard Road that comprises two premium grade office towers and a retail podium.

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Simply Swift is an indirect wholly-owned subsidiary of Hong Kong-listed Shun Tak Holdings which counts Pansy Ho as a shareholder. Ho is the daughter of Macau billionaire Stanley Ho.

The consideration was based on the value of the property’s net strata area. It is also subject to final adjustments.

The transaction is expected to complete on May 31, or by five business days after all conditions are satisfied.

PREH is expected to record a pre-tax gain on disposal of about $25 million.

The group says the transaction is in line with its active capital recycling strategy to rebalance its portfolio, enhance its financial flexibility and maximise its returns to shareholders.

PREH is in urgent need of funds. The property group faces $1.3 billion of debt maturing in 2020, including $560 million in bonds. Its debt pile towers over cash holdings of $119.8 million. A 4.55% $280 million bond matures on April 29. On Apr 3, PREH announced it had secured a $250 million loan to partially repay this bond. On Jul 3, $100 million 3.85% bonds mature. A further $180 million 5.95% bonds will mature on Aug 28. In addition, $106 million of secured loans and $634 of unsecured loans also mature this year. 

In a recent report, OCBC Credit Research says PREH may prefer to refinance all this debt via bank loans, given that bond issuance at this point of the cycle is likely to be challenging. Alternatively, PREH could tap on its major shareholders Kuok Koon Hong and Wilmar International which own 35.5% and 20% of the property group respectively. OCBC Credit Research also thinks PREH is unlikely to default on its debt.

PREH first acquired 111 Somerset with a consortium of investors in December 2013 at a price of $970 million, and held a 50.2% stake.

In January 2017, the PREH-led consortium divested 70% of its stake to Shun Tak, where all of the members, except PREH, divested their entire stakes. The transaction was made at an agreed price of approximately $1.258 billion based on net strata area. PREH itself divested a 20.2% stake, and retained a 30% stake.

In 2019, 111 Somerset underwent a major revamp that included enhanced retail offerings, medical suites, and an overhaul of the building’s office lobby and common areas. The revamp cost approximately $120 million. The two office towers, starting with the Somerset Tower, and the medical suites are also being sold on a strata basis.

PREH shares closed three cents higher, or up 7.317%, at 44 cents on Thursday.