Investors may be in deep water with The Residences at W. Sentosa
Blackstone has sold its interest in a luxury apartment complex in Singapore’s Sentosa Cove to BlackRock in a deal described by market analysts as a high-profile sale of financial interests.
Blackstone, which invested S$367 million ($276 million) in a profit participation scheme related to the Quayside Collection mixed-use development on Sentosa Island in 2014, said that despite housing prices, the project’s housing It held the rights to the cash flows from the portion for nearly 10 years. Projects are down about 41% from their peak.
Analysts said Blackstone, which invested in profit participation schemes through the first round of its Tactical Opportunities Fund, acquired an economic interest in The Residences Apartments at W Sentosa for about S$2,400 per square foot. However, local real estate databases currently price units in this luxury residential area at around S$1,747 per square foot, severely limiting financing options for the property.
Market sources said BlackRock paid the equivalent of S$1,200 to S$1,300 per square foot for Blackstone’s rights under a profit participation scheme in a deal completed in October. Blackstone’s funds are understood to have a typical tenor of eight years, with an option to extend for a further two years, and the vehicles invested in the CDL scheme closed their fundraising in 2012.
financial innovation
CDL launched a profit participation scheme nine years ago as a way for investors to capture cash flow from the Quayside Collection’s W Singapore Sentosa Cove Hotel and Quayside Isle Shopping Center in addition to the condo component. was announced.
Blackstone’s Managing Director Kishore Moorjani then led the investment in 2014.
The developer reportedly sold about 25 condominiums in the development before monetizing the complex through a profit participation scheme.
In addition to Blackstone’s S$367 million contribution, Malaysia’s CIMB Bank contributed S$102 million and CDL contributed S$281 million, according to an interview with The Straits Times in 2014. said Kishore Moorjani, a former Blackstone managing director who at the time led the company’s tactical opportunity strategy for Asia. The deal with the club also included a further S$750 million in senior loan facilities from DBS Bank and Oversea-Chinese Bank.
According to media reports, as part of the plan, CDL will guarantee backers a fixed dividend of 5% for five years, and the three companies will be eligible to share the proceeds from the sale of the property after five years, while CDL will He said he retained ownership. .
The developer had bought back financial instruments related to the hotel and retail component in a S$393 million deal in 2019, but The Residences at W. Sentosa remained a profit-participating company, according to company documents at the time. The property was under the control of the scheme and did not meet expectations.
CDL has also set up at least two profit participation schemes, including a S$1.1 billion program established in 2015 backed by three office assets and a S$900 million program linked to the Anderson Road Nouvelle 18 project in 2016. A S$78 million agreement was established.
Island Apartments Under Water
Due to the terms of the scheme, manager CDL is not allowed to sell the approximately 203 apartments in its portfolio for less than S$2,400 per square foot, meaning that luxury homes are priced on average at around S$2,700 per square foot. %, the assets remain in the scheme. Here are the numbers, according to data from PropertyGuru and EdgeProp.
In 2010, the same year that Resorts World Sentosa opened as Singapore’s first casino, Quayside Collection began selling condominium elements, and during its initial sales period The Residences at W Sentosa The highest price paid for an apartment in was set at S$2,968 per square foot. Year of marketing.
Disadvantages of the property include its location across a causeway from the rest of Singapore, its 99-year leasehold status (approximately 80 years remaining), and the 1,238 homes currently for sale on the property. The large number of units ranges from almost 1,238 units. 7,000 square feet.
According to government agency data, rents at the complex range from S$4.49 to S$6.97 per square foot per month, and the total floor area of the entire apartment complex is about 39,170 square feet (40,800 square meters).
As Sentosa Island apartment values decline, senior lenders will require higher loan-to-value ratios at set milestones in the financing package or upon refinancing. Profit participation schemes will rank after senior products in that respect. Banking industry sources who spoke to Mintyandi said the repayments would be much lower.
These circumstances, combined with the aging of the Blackstone fleet that originally supported the scheme, left the investment manager with few attractive options for disposing of its interest in the housing project.
Representatives for Blackstone declined to comment on the deal, and BlackRock did not respond to inquiries by the time of publication. JLL is said to have advised on the deal, but a representative for the real estate consultancy declined to comment.
Since closing on its first Tactical Opportunities Fund in 2012, Blackstone now has four strategies, including Blackstone Tactical Opportunities Fund IV, which closed last August with $5.2 billion in capital. is being developed as a series.