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Ngee Ann City
Takashimaya's fully-owned property unit Toshin Development has written to
Metro saying it will not be pursuing the latter's 27 per cent stake in Ngee
Ann City mall.
The letter was sent by Toshin's lawyers
to Metro's lawyers yesterday, sources told Business Times.
The move comes just a day after Metro
announced that Toshin was disputing 'the effectiveness' of the right of
first refusal which Metro had given to Toshin to buy its Ngee Ann City
retail space. The offer expired on Aug 7.
Metro's announcement on Monday also said
that Toshin had demanded that 'the dispute be referred to arbitration' after
Metro did not issue it a fresh right of first refusal by 3 pm on Aug 6 with
'revised terms of sale and purchase', as Toshin had demanded the previous
day.
Toshin's stand puzzled market watchers as
its parent Takashimaya Group had said on Aug 7 - the day the right of first
refusal expired - that it would not buy Metro's stake in Ngee Ann City as
'Japan has given clear direction not to increase our real estate holdings in
Singapore'.
When contacted last night, a Takashimaya
Singapore spokeswoman would only reiterate: 'We maintain what we said last
week.'
Metro's subsidiary Orchard Square
Development Corporation (OSDC) had given Toshin, which has a long-term lease
for the bulk of Metro's retail space at Ngee Ann City, the right of first
refusal to buy shop units in the complex. In addition, it offered Toshin an
opportunity to purchase its offices in the property. In all, Metro's space
in the prime Orchard Road complex is worth $538 million.
The latest move means that the path has
now been cleared for Metro to proceed with an asset securitisation of its
stake in Ngee Ann City involving German insurance giant Ergo. DBS Bank is
said to be handling the deal. The bonds, to be issued at par, will raise
about $560 million to pay for the $538 million purchase price as well as
some transaction costs, BT understands. The bonds will be issued in two
tranches. About 60 per cent are likely to be senior bonds which rank ahead
of junior bonds in terms of principal and coupon payments.
However, in return for taking this risk,
junior bond holders will receive a higher annual coupon, likely to be at
least 7.5 per cent. The coupon for the senior bonds will probably be closer
to 4 per cent, market watchers say.
Ergo and its associates are expected to
take up the majority of the junior bonds, which will be stapled with
preference shares giving them all the gains that the property derives,
whether it be capital appreciation when the asset is eventually sold, or
operational, in the form of excess rental income after all the senior
holders have received coupon payments.
Ergo was also the major investor of
junior bonds in last year's securitisation deals for Wisma Atria (excluding
the Isetan department store space), just next to Ngee Ann City, and Capital
Square near Raffles Place.
The net property yield on Metro's space,
based on the $538 million sale price, is about 6.3 per cent, against over 8
per cent for the Wisma space that was sold last year. -By
Kalipana Rahiwala Singapore
Business Times 13 Aug 2003
In a move that suggests a
split within Takashimaya group on whether to buy a 27 per cent stake in Ngee
Ann City from Metro Holdings, Metro revealed yesterday that Takashimaya's
property unit Toshin is disputing 'the effectiveness' of a notice of right
of first refusal given by Metro and demanded a fresh notice last week.
The revelation contrasts
with what Toshin's parent Takashimaya said last week - that Takashimaya
group will not take up Metro's stake in Ngee Ann City. 'Japan has given
clear direction not to increase our real estate holdings in Singapore,'
Takashimaya Singapore managing director Shuichi Tezuka said on Aug 7.
This was the expiry date
of the four-week period Metro had given Toshin to respond under its right of
first refusal notice to buy its share of Ngee Ann City mall.
Takashimaya Singapore
declined to comment yesterday when contacted.
Metro revealed the twist
of events in an announcement yesterday in which it also confirmed that it
signed on Sunday a letter of intent with German insurance giant Ergo for an
asset securitisation of its 27 per cent stake in retail and office space at
Ngee Ann City worth $538 million. The talk now is that Toshin may have
approached third parties as potential joint-venture partners to buy Metro's
stake. One of these is said to be Royal Brothers.
Metro's subsidiary
Orchard Square Development Corporation (OSDC) had given Toshin, which has a
long-term lease for the bulk of Metro's retail space at Ngee Ann City, the
right of first refusal to buy up shop units in the complex. In addition, it
offered Toshin an opportunity to purchase its offices in the property.
Metro revealed yesterday
that on the evening of Aug 5, Toshin served a notice on OSDC requiring,
among other things, that a fresh right of first refusal notice be given to
Toshin by 3pm on Aug 6 in respect of the 'retail units with revised terms of
sale and purchase'. And when that did not materialise, OSDC received a
notice from Toshin's lawyers in the afternoon of Aug 6 that Toshin is
disputing, among other things, the 'effectiveness of OSDC's notice and is
demanding that the dispute be referred to arbitration'.
'OSDC maintains that its
notice to Toshin is correct and in accordance with the terms of Toshin's
right of first refusal' under their lease agreement.
OSDC sought legal
advice, and has been advised that 'Toshin's contention is without merit'.
'Accordingly, OSDC has reserved its rights against Toshin and intends to
defend its position vigorously,' said Metro. -
By Kalpana Rashiwala Singapore
Business Time
11 August 2003
ESSENTIALS
Street Address
390 Orchard Road
Postal Code
2388
LOCATION
Orchard Road's largest shopping centre includes Takashimaya
Department Store as well as over 100 CRU's and office building.
Ngee Ann City is located
along Orchard Road and bounded by Orchard Link and Orchard Turn. This
locale is regarded as the premier shopping, hotel and entertainment precinct
in Singapore. The subject property is located inside the Restricted
Zone and is subject to the Area Licensing Scheme. The locality is well
served with direct bus service to all parts of the island including the
airport. Its is also served by the mass rapid transit with nearest
station "Orchard" located about 300 m from the complex.
There is a direct pedestrian access to the complex via the qst and 2nd
storeys, and the 1st basement via 2 underground tunnels linking to Wisma
Atria and Lucky Plaza. Vehicular access is by Orchard Turn and Orchard
Link.
OVERVIEW
Ngee Ann City is a 27-storey commercial complex comprising an
8-storey podium, two identical office towers (denoted as A and B) and 3
basement levels. The complex was complete in 1993 and its consolidated
site is almost rectangular in shape with total site area of approximately
25,693.20 sq m.
The 3rd basement, 6th and 7the storey houses the carpark while the 2nd
basement to the 5th storey accommodate retail units, department stores,
restaurants and other outlets. Offices are located from the 7th to the
27th storey. In addition, the 1st storey features a civic plaza and
the 4th storey houses recreation facilities including squash court, Jacuzzi
and swimming pool.
Vertical transportation within the building is facilitated by escalators,
staircases, good and passenger lifts for the podium bock whilst each of the
tower blocks are served by nine passenger lifts and a service lift and
staircases.
The complex is complete with central air-conditioning system and mechanical
ventilation (to carparks and staircases). Fire protection
facilities within the building include five sprinkler system; wet risers,
hose reels, break glass fire alarm, as well as smoke detectors (between the
access and actual floors). Every floor of the complex includes toilet
facilities.
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