Market commentators have characterized Blackstone’s selling of its stake in Sentosa Cove near Treasure at Tampines, an expensive condominium development in Singapore, to BlackRock as a pressured sale of the financial rights.
Despite the fact that the prices of the project’s residential units have dropped by about 41% since their peak, Blackstone has maintained the right to cashflows from the residential portion of the project for almost ten years, having invested S$367 million ($276 million) in a profit participation scheme connected to Sentosa’s Quayside near Treasure at Tampines Showflat Collection mixed-use development in 2014.
Local property databases estimate that the current pricing for units in the upscale residential compound is around S$1,747 per square foot. Analysts estimate that Blackstone, which invested in the profit participation scheme through the first edition of its Tactical Opportunities Fund, acquired its economic interest in the apartments of The Residences at W Sentosa at approximately S$2,400 per square foot. This severely limits financing options for the asset.
Market sources claim that BlackRock paid between S$1,200 and S$1,300 per square foot to purchase Blackstone’s rights under the profit participation plan in the transaction, which closed in October. It is understood that Blackstone funds normally have eight-year terms, with the option to extend for an additional two years. The investment vehicle
According to reports, the developer sold roughly 25 condominiums in the complex before using the profit share plan to monetize it.
According to a 2014 Straits Times interview with former Blackstone senior managing director Kishore Moorjani, who oversaw the company’s tactical opportunities strategy for Asia, CIMB Bank of Malaysia contributed S$102 million and CDL S$281 million in addition to Blackstone’s S$367 million commitment. A further S$750 million in senior credit facilities from DBS Bank and Oversea-Chinese Banking Corp. were also taken on by the club deal.
As part of the plan, CDL promised its investors fixed dividends of five percent for a period of five years. After that time, the three companies would be entitled to split the profits from any sales of the properties, but CDL would keep all of the earnings.
According to company documents from the time, the developer had repurchased the financial instruments associated with the hotel and retail portions in a S$393 million deal in 2019. However, because the prices for the properties have fallen short of expectations, The Residences at W Sentosa are still under the control of the Profit Participation Scheme.
At least two further profit participation plans were later established by CDL: a S$1.1 billion program supported by three office assets established in 2015, and a S$978 million agreement associated with its Anderson Road Nouvel 18 project in 2016.
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