Treasury China Trust (TCT) recently announced that it has entered into two separate deals to buy two properties for $206.64 million.
To fund the agreements, TCT intends to raise $79.46 million through a convertible bond and a private placement. The remaining costs will be financed by debt.
TCT announced that it has agreed to buy a 55 percent interest in Sanyang Property Development Co Ltd, the sole owner of Central Avenue Retail Mall in Qingdao, at an agreed price of S$93 million. The price includes the 55 percent stake of Sanyang’s liabilities that is assumed by TCT.
The company has also signed an exclusive but non-binding memorandum of understanding to buy 100 percent interest in a local Chinese property company which owns Shanghai’s Retail Mall at an agreed price of S$113 million.
Central Avenue Mall consists of an existing 43,463 sq m gross floor area (GFA) shopping mall with 98 percent occupancy and three adjoining cleared sites with GFA of 170,500 sq m that are being developed, while Retail Mall has a GFA of around 7,620 sq m with occupancy of 70 percent.
TCT said the two acquisitions will likely be completed by March 2011 and are expected to provide a 26.7 percent net property income accretion for next year.
The new properties will immediately raise the company’s net asset value (NAV) per unit from $3.91 per unit as of September 30 to $4.17, and to $4.57 per unit when the Central Avenue Mall project is completed by 2015.
The acquisitions are in line with the company’s focus on the fast growing commercial property sector in China, especially the retail segment, which is expected to grow from 29 percent of the company’s portfolio to 58 percent after the acquisitions.
This retail focus bodes well for the company’s fundamentals, said Richard David, chief executive of TCT.
“We expect that these acquisitions will have a demonstrable impact on TCT’s share price which, as at Dec 8, is trading at 60 percent discount to NAV and unitholders should be aware that management will consider undertaking a strategic review in 2011 of all options available to ensure that unitholders receive maximum value for their investments,” said Mr. David.