After being criticised for paying a record price to acquire a land parcel in Singapore’s central business district (CBD) last November, officials at IOI Properties Group now feel vindicated after they sold a third of the site to Hongkong Land Int Holdings Ltd for a premium, reported The Star.
Notably, Hongkong Land and Cheung Kong Holdings jointly participated in the tender last year, offering S$2.13 billion for the plot.
But IOI secured the site after it submitted the highest bid of S$2.57 billion (RM7.77 billion), which translates to S$18,180 (RM56,557) psm or S$1,688.98 psf based on the site’s gross floor area.
Now, London-listed Hongkong Land has agreed to pay S$940 million (RM2.89 billion) to acquire a 33 percent stake in the land via joint venture (JV) firm Wealthy Link, while IOI will own the remaining 67 percent stake.
The land it is purchasing from IOI is next to One Raffles Quay and near the Marina Bay Financial Centre.
Both companies have also entered into an agreement to co-develop the 1.1ha plot. In particular, they intend to construct a small retail podium spanning 30,000 sq ft and two office towers with a combined leasable area of 1.26 million sq ft.
“Our new JV allows Hongkong Land to expand its portfolio of prime commercial properties in Marina Bay and demonstrates our long-term confidence in the Singapore property market,” said its CEO Robert Wong.
According to RHB Research, while the new transaction is expected to improve IOI’s balance sheet, the joint venture still requires the approval of Malaysia’s central bank and the Singapore’s Urban Redevelopment Authority (URA).
“With this JV, we believe that the participation of Hongkong Land would help ease the cash-flow burden at IOI Prop. As the funding structure for the construction loan has yet to be finalised, we are keeping our net gearing projections unchanged for now.”
Furthermore, the research house noted that the S$940 million selling price for a third of the land already includes stamp duty as well as goods and services tax.
“The proceeds will be used to reduce IOI Prop’s existing bridging loan and some corporate guarantees. The proposed JV is expected to be completed by the first quarter of 2018,” it added.
Among developments by IOI Properties are:
1. AVENS, Residences
2. LA THEA Residences