Creative in $250m property deal

Quote:

Originally Posted by mr funny

March 24, 2008, 8.05 am (Singapore time)

Creative in $250m property deal

SINGAPORE - Singapore's Creative Technology, which makes digital music players, said on Monday it had agreed to sell and lease back its headquarters in Singapore for $250 million (US$180.5 million).

Creative said in a statement it was expected to reap a gain of $200 million from the deal. The gain would be treated as a deferred gain that would be amortised and recognised in its income statement over the lease term of five years.

The deal was likely to be completed by the end of June, Creative said. The buyer of the building was not named. -- REUTERS

This could be another sign of more trouble for Sim Wong Hoo's Creative Technology as any finance guru would know that sell and lease back of property is a desperate move to get cashflow in the same way as the factoring of receivables.

Particularly so when this is Creative's Headquarters. If it had been other investment properties leased to other companies, the perception would be vastly different and can be argued that the company is taking advantage of the current property boom to realise its investment gains. But for selling and leasing back its own home, the HQ building, this is risky.

What happens if Creative defaults in its rental? It can become homeless at a time when property prices are still heading north although transactions have taken a temporary break.

Hmm.... must seriously consider what to do with my Creative shares.