OUE sells US bank tower for $597.7m

It will streamline its asset ownership when the US property market may not be favourable.

Beringia Central, an indirect wholly-owned subsidiary of OUE Limited, has entered into a sale and purchase agreement (SPA) to sell its US bank tower to USBT Property Owner LP for $597.7m (US$430m), an SGX filing revealed.

The purchase consideration had been negotiated on a willing-buyer and willing-seller basis, after taking into account the market value of the property and the current US property market conditions in the relevant sectors amidst the COVID-19 pandemic.

Within three business days following the execution of the SPA, USBT Property Owner is required to make a deposit of $13.9m (US$10m) into an escrow. The balance of the remaining purchase consideration shall be paid in cash to Beringia Central at the closing of the deal.

Closing shall take place on the earliest to occur of 8 September. The purchaser of teh property also has the right to extend the targeted closing date and shall deposit an additional non-refundable deposit of $6.95m (US$5m) in escrow.

The sale will enable OUE to streamline its asset ownership in a period when the longer term outlook of the US property market may not be favourable, the company said.

“Unlocking capital from this divestment will enable the Company to recycle its capital to more optimally pursue higher growth reinvestment opportunities if and when such opportunities arise; and in the absence of opportunistic acquisition targets, the Disposal will in the meantime, enable the Group to substantially increase its cash reserves, improve its net gearing by paring down existing debts and remain nimble in the current uncertain global economic climate,” it said.

The disposal is not expected to have a material impact on the net tangible assets of the group for FY2020, but is expected to result in an estimated material decrease in the earnings per share (EPS) of OUE by around $0.35.

The tower is located in at 633 West 5th Street, Maguire Gardens at 700 W. Fifth Street and Westlawn Garage at 524 Flower Street, Los Angeles. It has 72 floors of office accommodation and six levels of underground parking. The property was bought by Beringia Central in 2013 for $459.38m (US$367.5m).

In the same vein, OUE also intends to dispose of its leasehold interest in OUE Skyspace LA. Currently, Beringia Central (as landlord) and its indirect wholly-owned subsidiary OUE Skyspace LLCare parties to a lease which grants the latter the right to operate the Skyspace business.

Whilst Beringia Central is currently engaged in discussions with several prospective purchasers of the Skyspace operations, no definitive agreement has been entered into in relation to the sale of Skyspace. “Any sale of Skyspace or transfer of the liquor license separate from the sale of the property to the purchaser will not affect the purchase consideration for the property,” OUE assured.