New York-headquartered private equity real estate giant Blackstone has made an innovative investment in Singapore via its special situations Tactical Opportunities Fund.
The firm has invested S$367 million (€225.54 million; $281.20 million) from the fund in a S$1.5 billion investment platform created by Singapore-based developer City Developments Limited (CDL) aimed at monetizing its portfolio of real estate assets in Singapore.
In what is thought to be the first issue of its kind in Asia, the unique vehicle, called the profit participating security (PPS) will invest in the cashflows of CDL’s integrated real estate development project on the resort island of Sentosa in Singapore. Known as the Quayside Collection, the site comprises a five-star hotel, retail property and residential apartments.
“This is a first of its kind hybrid instrument, akin to a hybrid investment or a convertible bond, but which has not yet been seen in real estate yet,” Kishore Moorjani, head of tactical opportunities, Asia at Blackstone told PERE.
The other core investors in the platform include the Malaysian bank CIMB, with an investment of S$102 million and Astoria Holdings, a wholly owned subsidiary of CDL, which subscribed S$281 million.
The PPS has a tenor of five years and will pay a fixed coupon of 5 percent to the investors in addition to the cash flows from the assets. This will include the profits that Cityview Place Holdings – the owner of the property – earns from its business operations, which will then be distributed as dividends to the investors. CDL will continue to manage the properties.
Moorjani did not disclose the expected returns for the fund from this investment.
“This is a great portfolio of assets with a high quality partner. There is no development risk. We are taking a long term view on what one can derive from the sales realization of these assets,” he said.
The Quayside Collection has been operational for two years. The 240-room Sentosa Cove hotel has high occupancy and the residential apartments are over 50 percent occupied, according to CDL. Quayside Isle, the retail property is located on the waterfront precinct and is spread over 40,000 square feet.
“There is no other cluster of upscale assets with similar waterfront living in Singapore. Quayside Collection’s exclusivity makes this cashflow participation platform all the more unique for investors,” Kwek Leng Beng, CDL’s executive chairman said in a statement.
Blackstone’s Tactical Opportunities division pursues investments that do not fit the mandate of the other business lines run by the firm. The first Tactical Opportunities fund was launched in 2012 and attracted 5.5 billion of equity from investors. Of this, around 10 percent has been invested in Asia, according to the firm. By the end of November, A$150 million (€98.38 million; $122.67 million) from the fund was invested in the Perth-based National Lifestyle Villages, a developer of retirement communities in Australia.