Freehold city condo in the works
Project is a result of Keppel Land and K-Reit Asia property swop
By Fiona Chan
ONE of the few freehold residential projects to be built in Singapore's city centre is now on the drawing board thanks to an unusual property deal.
The project will be constructed in Tanjong Pagar, where Keppel Towers and GE Tower now stand, and is the result of a rare swop of properties between two companies.
K-Reit Asia, the real estate investment trust that owns Keppel Towers and GE Tower, is selling the two freehold office buildings to Keppel Land for $573 million.
In return, Keppel Land will sell its one-third stake in Phase One of Marina Bay Financial Centre (MBFC) to K-Reit Asia for just over $1.4 billion. Keppel will reap a net gain of about $321 million from selling the asset.
Based on these prices, the values of the properties work out to be $2,450 per sq ft (psf) for MBFC, and $1,201 psf for the total potential floor area of Keppel Towers and GE Tower.
Keppel plans to redevelop the office buildings in Hoe Chiang Road diagonally opposite Amara Singapore hotel into a high-rise condominium with shops and restaurants on the first floor. It will comprise two towers of 620 apartments in all.
The developer has already obtained outline planning permission from the Urban Redevelopment Authority to redevelop the site with a plot ratio of 5.6 and a total gross floor area of 481,800 sq ft.
At a joint press conference yesterday, senior executives of both companies described the deal as a 'win-win' situation.
It is a chance for Keppel Land to acquire a freehold residential site in an area that will undergo major redevelopment in the coming years, with the relocation of ports and the Malaysian railway station.
'The site is well-positioned to ride on the growing popularity of city living,' said its chief financial officer Lim Kei Hin.
Property consultants told The Straits Times they expect strong demand for the new freehold condominium.
'There are hardly any freehold residential properties downtown, and the site is well-located between the financial district and the HarbourFront area,' said Ms Tay Huey Ying, director of research and advisory at Colliers International.
Going by the break-even price and values of other condominiums in the area, the new project could fetch prices above $2,000 psf, said Cushman & Wakefield managing director Donald Han.
He also noted that the asset swop reflects the 'symbiotic relationship' between Keppel and K-Reit, which provides a steady stream of properties to each company, helping them get around the difficulty of acquiring new and desirable assets on the open market.
Keppel's Mr Lim said yesterday that divesting the MBFC stake allows his firm to unlock the value of that investment and help in the growth of K-Reit Asia, of which Keppel has a 40 per cent stake.
The chief executive of K-Reit Asia Management Ng Hsueh Ling said she had approached Keppel to suggest the deal, as Keppel Towers and GE Tower were getting old and required increasingly expensive maintenance. Keppel Towers is 19 years old while GE Tower is 17 years old.
After the asset swop goes through, 90 per cent of K-Reit Asia's portfolio will be in the prime Marina Bay and Raffles Place areas, up from 60 per cent previously, said Ms Ng.
The 99-year leasehold MBFC consists of two office towers that are fully leased to tenants, including Standard Chartered Bank and Barclays, as well as the underground Marina Bay Link Mall, which is about 87 per cent leased.
More importantly, the transaction announced yesterday will strengthen both companies' financials.
Keppel will receive net cash proceeds of $812 million from the deal, which Mr Lim said it will use to seek out investment opportunities in commercial and residential properties in Singapore, China, Vietnam, Indonesia and India.
K-Reit said the acquisition of the MBFC stake will give its unit holders a higher average return than before, although it could not reveal exact figures yet. It will finance the deal with proceeds from the sale of Keppel Towers and GE Tower, additional loans and proceeds from last year's rights issue.
fiochan@sph.com.sg
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· Keppel Land will buy Keppel Towers and GE Tower (both in photo above, Keppel Towers at left) from K-Reit Asia for $573 million.
· Keppel Land plans to redevelop the site into a high-rise freehold condominium with a plot ratio of 5.6 and a total gross floor area of 481,800 sq ft.
· It will have two towers and 620 apartments. On the first floor, there will be shops and restaurants.
-- BT FILE PHOTO
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