Creative Selling S'pore Building For $250m

Source : The Business Times, March 25, 2008

It expects $200m gain from sale, but warns of Q3 operating loss

CREATIVE Technology could get a bumper cash infusion this June. The company said yesterday it has entered into an agreement with a buyer to sell and lease back its 11-year-old Singapore office building at International Business Park.

The sale price for the proposed transaction is $250 million. Creative will lease back the whole building for five years with an option for additional periods of three and two years, the company said in a statement, without disclosing the identity of the buyer.

Creative said it expects to make a gain of about $200 million from the transaction. It said that in accordance with US accounting standards, this amount will be treated as a deferred gain and will be amortised and recognised in the company's income statements over the lease term of five years.

The deal, which is subject to regulatory and shareholder approval, is expected to be completed by end-June.

Creative has owned its flagship Singapore building - called Creative Resource - since it was completed in 1997. The MP3 player and PC sound card specialist moved into the building from its Ayer Rajah Industrial Estate premises that year.

Creative Resource houses the company's headquarters operations and subsidiaries in Singapore.

In another announcement yesterday, Creative said its third-quarter revenue will be 'below target'.

For its fiscal Q3 that ends on March 31, it expects a revenue of about US$150 million. Revenue in the same quarter last year was US$183.8 million.

As well, operating expenses in Q3 will be higher than the company had forecast. This is mainly due to currency exchange rates, it said.

Creative expects to report an operating loss for the quarter.

However, the company - which this year started selling subscription-based video-conferencing services - is still expecting overall profitability in the period. An investment gain of about US$20 million is expected to boost its bottom line in Q3.

Creative has posted successive profitable quarters for the year so far. In 2007 it posted revenue of US$914.9 million and net income of US$28.2 million, aided by a US$100 million paid-up licence from MP3 market leader Apple Inc.