Represents maiden venture in US property market.
SGX Catalist-listed SingHaiyi Group Limited (SingHaiyi) announced today that it will transfer US$29.25 million to American Pacific International Capital, Inc. (“APIC”), a corporation owned by the controlling shareholders of the Company as deposit for a proposed 65%-stake in a major shopping mall located in Cincinnati, Ohio, United States.
SGX-Catalist listed SingHaiyi said the deposit to APIC will be refunded without interest if the Company decides over the next three months that it will not proceed with the investment in Tri-County Mall, a two-storey mall with 1,261,500 gross square feet of retail space, of which 227,072 square feet is owned by Macy’s, a leading department store.
Located in Springdale, about 20 miles north of downtown Cincinnati, the mall features two other anchor tenants apart from Macy’s – Dillard’s and Sears. With a current occupancy rate of about 84% (excluding Macy’s), the mall has an estimated capitalisation rate of 11% per annum based on net operating income (before interest, depreciation and tax) over the purchase price of the mall.
SingHaiyi said it believes that with focused efforts, the mall’s occupancy rate, which was affected by previous receivership and foreclosure proceedings, will be improved. The mall was placed under receivership and foreclosure proceedings mainly due to the huge debts it has incurred.
SingHaiyi recently raised S$226.0 million from a rights issue and placement exercise as part of its strategy to expand its real estate investment activities beyond Singapore to include the United States. As stated in a Circular to Shareholders dated 13 June 2013, APIC has given a letter of undertaking to offer SingHaiyi the first right of refusal for any real estate investment in the United States that it is considering. APIC will in such instances act as principal and not as agent, and may co-invest in the projects with SingHaiyi.
At a court-ordered auction on 19 July 2013 in Hamilton County, Ohio, APIC was successful in its US$45 million bid for the entire interest in Tri-County Mall free of debts and encumbrances and has paid in full to the Hamilton County Sheriff subsequently after the auction.
SingHaiyi has indicated its intention to acquire a 65%-stake in the mall and has three months to conduct due diligence. However, SingHaiyi has the right to vary the percentage of its participation to a minimum 51% stake, or a maximum 100% stake. If it decides not to go ahead, APIC will refund the deposit by early December 2013.
If concluded, the Tri-County Mall transaction will mark SingHaiyi’s maiden venture into the U.S. property market, extending its “investment banking approach” beyond Singapore, as outlined to shareholders at an extraordinary general meeting convened on 28 June 2013.
SingHaiyi’s Non-Executive Chairman, Mr. Neil Bush, said, “Having secured shareholders’ approval to execute our strategy to expand our real estate investment activities beyond Singapore, we have wasted little time in seeking out exceptional deals which can enhance shareholder value.”
“The arrangement with APIC allows SingHaiyi to move rapidly and seize real estate investment opportunities which may arise. If concluded, this will mark our first transaction under the diversification strategy. We are confident that the U.S. real estate market is still under-estimated with the broader economy at the beginning of a recovery phase.”
“The US$45 million successful bid price of Tri-County Mall is at a steep discount to the net book value of US$194 million based on the management accounts as at June 2013. If the transaction goes through, the mall is immediately revenue generating. We will try to bring more tenants and talks are underway for a few potential tenants,” Mr Bush said.
SingHaiyi with its partners are currently developing four residential projects in Singapore with a combined estimated gross development value of approximately S$900 million.
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