http://www.businesstimes.com.sg/arch...-518m-20130705

Published July 05, 2013

United Engineers to sell UE BizHub East for $518m

Buyer to add two more properties to Viva Industrial Reit

By Mindy Tan


UNITED Engineers Ltd has proposed plans to divest its mixed-use development UE BizHub East in Changi Business Park for $518 million.

The group's wholly-owned subsidiary United Engineers Developments (UED) has entered into a conditional put and call option agreement with Viva Industrial Trust Management (VITM), in its capacity as the manager of the proposed Viva Industrial Reit (real estate investment trust), for the sale of the property.

Talk in the market is that the proposed Viva Industrial Reit is also acquiring Technopark @ Chai Chee from CapitaLand for about $200 million and a property in Tuas from another party.

The proposed Reit is said to be backed by Tan Kim Seng, the founder and former chairman of KS Energy.

United Engineers, in its announcement yesterday on the proposed divestment of UE BizHub East, said that upon completion of the proposed divestment, UED is expected to realise an estimated net divestment gain of $86.7 million.

UED also has the option to subscribe for 5 per cent of the stapled securities of a stapled group comprising the Reit and a business trust proposed to be issued and listed on the exchange.

The group is also granted the right to subscribe for a 10 per cent stake in each of VITM and Viva Asset Management, the trustee-manager of the business trust.

Upon completion of the proposed divestment, UED will be appointed as the property manager to operate, manage, maintain and market the business park and retail spaces for a term of five years.

The group will also continue to manage the Park Avenue Changi hotel which is within the development.

Under the terms of the hotel lease, the group will operate the hotel for five years, and has the option to renew the lease for three successive terms of five years each, subject to JTC's approval for each renewal.

UE BizHub East comprises two adjoining business park buildings, the 251-room hotel Park Avenue Changi and convention centre with retail spaces.

UE BizHub East has a leasehold period of 30 years starting Feb 1, 2008, with an option to extend for another 30 years.

Currently, the business park buildings are 73 per cent leased out and house corporate tenants such as Cisco Systems (USA) and BT Singapore.

In addition, 90 per cent of the retail space has been leased out to tenants including FairPrice Xtra@Changi Business Park and Fitness First.

"The proposed divestment of UE BizHub East is part of the group's ongoing strategy to unlock value from its various investments in properties including build-to-suit projects," said Jackson Yap, United Engineer's group managing director and chief executive officer.

"The group regularly evaluates divestment opportunities to monetise its investment in properties to free up resources for investing in new projects. As such, the group's property portfolio will be refreshed, streamlined and consolidated, thereby maximising overall returns," he added.

United Engineers shares rose 12 cents or 5.15 per cent yesterday to end trading at $2.45.