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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."
[email protected]
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."
[email protected]