SINGAPORE – The manager of BHG Retail Real Estate Investment Trust (BHG Retail Reit) has terminated its proposed acquisition of a Beijijng outlet mall due to the “impact of Covid-19 on capital markets and the economy as well as the inherent unpredictability and evolving situation”, it said in a bourse filing on Wednesday evening (June 3).
Both the Reit’s manager and seller Horizon Thrive International have mutually agreed not to proceed with the acquisition.
The termination of the acquisition will not have any material adverse impact on the Reit’s consolidated net asset value or distribution per unit for the current financial year ending Dec 31, its manager said.
Last December, the Reit manager proposed to acquire Badaling Outlets for $455 million, which would have been the Reit’s first investment in an outlet mall.
Badaling Outlets, which is made up of 14 buildings, has a gross floor area of around 58,348 square metres. The Reit’s manager had said at the time that the acquisition would enhance the Reit’s portfolio and exposure to the fast-growing premier retail outlet mall sector in China.
The Reit’s trustee, DBS Trustee Limited, had entered into a conditional share purchase agreement with seller Horizon Thrive International to acquire all shares in Premier Outlets Investment, which holds the company that owns Badaling Outlets.
Horizon Thrive International is wholly-owned by Chang Dingjie, a director of Beijing Hualian Group Investment Holding Co, the Reit’s sponsor.
The Reit manager had proposed to issue up to 260 million new units to satisfy part of the purchase price, and to pay S$260 million in cash.
In its statement on Wednesday, the Reit manager said it was “unlikely” that certain key conditions in the share purchase agreement would be fulfilled by the long-stop date of June 30.
“The impact of Covid-19 on the equity markets may not be favourable for the (Reit) manager in obtaining equity financing to part-finance the purchase consideration for the acquisition to be attractive,” it said.
It added that the bases for its three agreements relating to the acquisition, including the purchase consideration and fixed income amount, had been agreed to prior to the pandemic.
The crisis has since affected these bases, and in turn, the valuation of Badaling Outlets, which was obtained by the Reit manager and trustee based on the agreements and on pre-Covid-19 conditions.
“While the manager and the vendor had considered extending the agreements, it would not be possible to renegotiate new terms for the agreements at this stage given the present uncertainties,” it added.
The Reit manager said that no break fee is payable by either party, and no deposit was paid by the Reit for the proposed acquisition.
Units of BHG Retail Reit were trading flat at $0.64 as at 10.40am on Thursday.