Treasury China Trust (TCT) has entered into a binding agreement to acquire 100 percent of Huai Hai Mall in Shanghai for RMB575 million.
Situated in the heart of the Shanghai CBD, the acquisition reinforces the trust’s growth strategy in China’s expanding retail sector.
“This is yet another exciting development in the progress of TCT and reinforces our position as one of the largest investors in China’s commercial real estate sector, with a major foothold in Shanghai. With this latest acquisition, our asset portfolio in Shanghai will be increased to four properties, totalling in excess of 330,000sqm of gross floor area (GFA) under management,” said Richard David, CEO of TCT.
The four-level property, which comprises three levels above ground and one basement level, is zoned for retail use, with a total GFA of 7,619.9 sq m.
Huai Hai Mall is now 70 percent occupied and fetching rents well below the market rates. Thus, the acquisition provides the trust with the opportunity to undertake the complete repositioning and refurbishment of the mall in order to double its current rental income over five years.
In line with this acquisition, TCT plans to issue S$59.7 million in convertible bonds, at S$2.10 per unit.
“This represents our first move into the convertible bond market. The terms for the bond reflect the strong prospects for TCT over the short to medium term and follow our successful first equity offering in December 2010, which was substantially over-subscribed,” said Mr. David.
The convertible bonds have a 3.5 year term and carry a yield to maturity of 16.75 percent. Together with the equity placement undertaken in December last year, the convertible bonds provide the trust with total funding of more than S$85 million, which will underwrite the acquisition of the Huai Hai Mall.