Is SingHaiyi Group Ltd’s Latest Deal with Suntec Real Estate Investment Trust a Smart Move?

Following an announcement last week that it would be partnering and investing with ARA Asset Management Ltd (SGX: D1R) in a private real estate fund, SingHaiyi Group Ltd (SGX: 5H0) revealed a new deal yesterday that’s also related to ARA Asset Management.

This time around, SingHaiyi’s striking a deal with Suntec Real Estate Investment Trust (SGX: T82U), a REIT that’s managed by ARA Asset Management.

SingHaiyi is looking to acquire and redevelop Park Mall, a commercial and retail property owned by Suntec Real Estate Investment Trust that’s seated near the Orchard Road shopping belt.

Under the terms of the deal, SingHaiyi will be entering into a 35:35:30 joint venture with Haiyi Holdings Pte. Ltd., an investment vehicle owned by SingHaiyi’s major shareholders Gordon Tang and Chen Huaidan, and Suntec (PM) Pte. Ltd., which is wholly-owned by Suntec REIT. Park Mall will be bought by the joint venture for a total sum of S$411.8 million and then undergo redevelopment into a property containing two office blocks and a retail wing.

Once the redevelopment’s done, SingHaiyi and Haiyi Holdings collectively hold the right to acquire one of the office blocks and the right of first refusal to acquire the retail wing of the new property. Meanwhile, Suntec (PM) has the right to acquire the other office block.

SingHaiyi will be investing up to S$134.4 million for the whole project and this capital will come from a combination of the firm’s existing cash resources and external borrowings.

The deal to redevelop Park Mall will give SingHaiyi another avenue for growth. It might also signify the strong relationship that SingHaiyi has with ARA Asset Management and the REITs that are managed by the latter, such as Suntec REIT. It might also mean that SingHaiyi will continue to work with the real estate fund manager in future deals involving other properties or REITs.

If that really is the case, then ARA Asset Management may just have secured itself a new source of funding for future deals and a partner to recycle many of its assets. As for SingHaiyi, this relationship gives the company good access to more properties to invest in and possibly improved upon so as to create value for its shareholders.

Foolish Summary

SingHaiyi can be considered as a relatively new property company. It is still at the stage of building up its asset base and it is finding deals to create value for its shareholders.

Many of the private funds and REITs managed by ARA Asset Management own mature properties that might need to be sold in order to fund future deals or to realize their value. Therefore, it seems the partnership between SingHaiyi and ARA Asset Management is a good fit for both and may work out well.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim owns ARA Asset Management Ltd.