GSH Corporation stands to make a net profit of nearly S$80 million from disposing of its 51 per cent stake in the consortium that holds GSH Plaza.
This figure is based on information released in the regulatory filing by GSH Corporation, which is controlled by “Popiah King” Sam Goi, to the Singapore Exchange on Monday evening. The GSH-led consortium has entered into a binding term sheet with Hong Kong-listed Fullshare Holdings for the proposed sale of the consortium’s investment vehicle Plaza Ventures at S$725.2 million.
Plaza Ventures is the vehicle the consortium used for the purchase of the former Equity Plaza in 2014. The consortium then renamed the building GSH Plaza and embarked on a major spruce-up with a view to doing strata sales.
Currently, GSH Corporation holds 51 per cent interest in Plaza Ventures. The other shareholders are: Vibrant DB2 (a 51:49 joint venture between listed Vibrant Group and niche property developer DB2 Properties), which has a 35 per cent stake, and Mr Goi’s private investment vehicle, TYJ Group, holding the balance 14 per cent.
Fullshare, which will buy 100 per cent of Plaza Ventures, is involved in property development, provision of green building services, investment, healthcare products and services business, and green technology solutions.
This S$725.2 million valuation for Plaza Ventures comprises its equity of S$231.94 million, total existing shareholder loans of S$133.58 million which will be assigned to Fullshare, and S$359.69 million in bank loans (to be redeemed or assumed by Fullshare at completion of the transaction).
The proposed sale’s consideration is based on, among other things, the net asset value of Plaza Ventures based on its unaudited management accounts as at Nov 30, 2016, and adjusted on the basis that the available office units at GSH Plaza are valued for at least S$2,900 per square foot, said GSH Corporation.
The vendors and Fullshare will use their best endeavours to finalise and enter into a sale and purchase agreement for the proposed sale by March 3.
During the same timeframe, DB2 will buy over the retail units of GSH Plaza for S$75.59 million.
This translates to S$6,166 per square foot based on the 12,260 sq ft total strata area for the 21 retail units on Levels 1 and 2 of GSH Plaza. The building has 259 strata office units on Levels 3 to 28 adding up to 283,349 sq ft.
Plaza Ventures began strata sales of the offices in April 2015 and to date is understood to have sold close to 100 units. Based on caveats data captured in URA Realis, office units with a total of just 48,018 sq ft strata space have been sold for a total price of S$146.4 million (reflecting an average price of S$3,048 psf). Property market watchers noted that there are other office transactions at GSH Plaza for which caveats had not been lodged yet.
Market watchers generally consider the at least S$2,900 psf pricing for GSH Plaza’s remaining office space in the deal to be on the rich side, given that it is a premium of at least 11.5 per cent to the S$2,600 psf paid recently for 17 office units totalling 79,459 sq ft at Prudential Tower . “And don’t forget, GSH Plaza’s remaining office space is much larger than what changed hands recently at Prudential Tower and one would expect a discount for a bigger space,” said a seasoned property agent. Furthermore, GSH Plaza is on a site with a shorter balance lease tenure of 72 years, compared with 78 years for Prudential Tower, observers noted.
Vibrant Group, stands to make a S$27.75 million net profit from the transaction, based on information in its its statutory filing with SGX.
Both Vibrant and GSH cited the same rationale for their respective divestments in Plaza Ventures: “The proposed sale presents a good opportunity for the group to realise its investment in the project, which is in line with the group’s strategy.”