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View Full Version : Deal to monetise Sentosa assets 'just the beginning'



reporter2
26-12-14, 13:40
http://www.straitstimes.com/archive/saturday/premium/money/story/deal-monetise-sentosa-assets-just-the-beginning-20141220

INVEST

Deal to monetise Sentosa assets 'just the beginning'

Blackstone fund's head says scheme suits sophisticated investors well

Published on Dec 20, 2014 12:40 AM

By Cheryl Ong


PRIVATE equity giant Blackstone Group's $1.5 billion deal with City Developments and CIMB Bank will not be the last of its kind in Singapore's property market.

The "profit participation security" scheme, an investment instrument linked to CDL's Sentosa Cove properties, "could unveil a new era of sophistication in real estate" here, Mr Kishore Moorjani, head of Blackstone's US$5.5 billion (S$7.2 billion) tactical opportunities fund, told The Straits Times.

Under the club deal inked on Tuesday, Blackstone will invest $367 million, CIMB will fork out $102 million and CDL $281 million, with a further $750 million in the form of bank loans.

In simple terms, the deal "monetises" the Quayside Collection - W Singapore-Sentosa Cove hotel, retail property Quayside Isle and The Residences at W Singapore-Sentosa Cove condo - and lets CDL take about $1 billion out of the structure. CDL will use the funds for expansion overseas.

CDL, in return, is guaranteeing a fixed payout of 5 per cent for five years for Blackstone and CIMB. The three firms, which could sell the properties in five years, will have a share of the proceeds from any sale. But CDL will maintain full ownership of the Sentosa properties.

Blackstone's right to the cashflow generated by the assets is a "unique" approach to unlocking value in the property sector.

"What we've done is not exactly rocket science; I think we've sort of brought new tools to an existing asset class," said Mr Moorjani. "Typically, in property, we view things as plain vanilla buying and selling. But there are other ways to participate in assets and businesses, and that's all we've done here: We've participated in the profits of an asset.

"I think it will unveil a new option in terms of how people think about extracting value out of assets without having to sell them."

Mr Moorjani likened the structure of the deal to investors buying shares in a listed firm instead of owning the business.

But he acknowledged that such investment structures are more "well-suited" for sophisticated investors like private equity funds than institutional and retail investors at the moment.

In a real estate investment trust, for instance, retail investors know for sure what they will own in the trust's portfolio.

"If you're trying to take this to a wider audience, my sense is maybe it will happen some day... Here, you're really participating in the profits, and for institutional and retail investors, that may be a bit more challenging."

Blackstone is ready for more of such "creative" investments here, added Mr Moorjani, who said he enjoys being "a bit of a maverick" around such deals.

The property market here is well placed for more too, but it is critical for partners in such deals to have an "alignment of what each partner brings to the table".

In the case of CDL, he said the developer is also an investor and has a significant stake in the transaction: "We felt very good about the fact that... they're not just laying risk off their books."

A diversification in asset class, in the case of the Quayside Collection, is "helpful", because the components complement each other and drive income, he added.

"Would I say that, for example, we wouldn't do another transaction like this if it was only a hotel? We would, but we probably would look at it somewhat differently. The answer is, it really depends, it's not a template, every transaction will be somewhat different."

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reporter2
26-12-14, 13:57
http://www.businesstimes.com.sg/real-estate/sentosa-deal-blackstone-ready-for-5-year-wait

Sentosa deal: Blackstone ready for 5-year wait

It can wait that long to see higher returns on its investment in CityDev's Sentosa project

20 Dec


BLACKSTONE Group, which is taking part in the refinancing of luxury Singapore properties, is prepared to wait as long as five years for a turnaround in residential prices to see higher returns on the transaction.

Blackstone and Malaysia's CIMB Bank agreed this week to take part in a financing for a luxury hotel, retail and residential development, owned by City Developments, Singapore's second- largest developer, on Sentosa.

In exchange for S$469 million in funding, the New York-based private-equity company and CIMB will receive a fixed 5 per cent coupon for five years and other cash flows from the Sentosa project. They also have rights to any proceeds from the sale of the luxury residential units on Sentosa.

Blackstone, the world's biggest private-equity property investor, has accelerated investments in Asia this year, including buying GE Japan's residential business and entering the retiree housing market in Australia. The firm is taking advantage of a slowdown in the Singapore housing market following government curbs since 2009.

"We have a positive long-term view of Singapore," said Singapore-based Kishore Moorjani, a managing director who oversees Blackstone's Tactical Opportunities Group.

Blackstone wouldn't be satisfied with just a 5 per cent return on its Sentosa investment and is eyeing the long-term potential of the residential properties, he said. "We will do very well on this in the long term. We will be better off in five years than we are today," he said.

Both Blackstone and CIMB said they are willing to wait several years before selling to give prices time to recover.

CityDev shares rose 2.12 per cent to close at S$10.09 on Friday in Singapore trading.

The Singapore government has been trying to rein in the property market since 2009 to prevent a bubble forming, with the toughest measures, including stricter lending criteria, introduced last year.

Residential prices fell 0.7 per cent in the three months ended September, the fourth quarter-on-quarter drop, bringing the slide this past year to 4 per cent.

Singapore is unlikely to ease the curbs until "a meaningful correction" takes place, Finance Minister Tharman Shanmugaratnam said on Oct 28, suggesting prices have further to decline.

Condominium prices in Sentosa, an upscale residential enclave with sweeping views across the Singapore Strait, are close to their lowest level since the end of 2006, according to Maybank Kim Eng Securities.

Some house prices on the island have halved since 2012, figures from the Urban Redevelopment Authority show.

Since last year, Blackstone's property acquisitions in Asia have ranged from Chinese shopping malls to Australian office towers. Since making its first deal in the region in 2007, Blackstone has invested about US$7 billion, including US$3 billion of equity, according to the firm.

Last month, the US firm agreed to invest A$150 million (S$161.2 million) in National Lifestyle Villages, which develops manufactured retirement communities in Australia, and also agreed to buy GE's residential business in Japan for more than 190 billion yen (S$2.1 billion).

Under the terms of the refinancing agreement, CityDev has to achieve a price of at least S$2,400 per square foot before it can sell the residential properties. It has sold only 25 of the 228 apartments in the Sentosa development and has leased about half of the rest. Bloomberg