IOI is CDL’s partner for South Beach

Published 9 April 2011
The Business Times
By Kalpana Rashiwala

It’s taking 49.9% stake, with CDL holding majority; consortium developing project bags new $1.6b financing facility

MALAYSIA’S IOI Corporation will take a 49.9 per cent stake in the South Beach project in Singapore with City Developments Ltd (CDL) holding the majority 50.1 per cent.

ICONIC: The South Beach project - located between Raffles Hotel and Suntec City and next to the Esplanade MRT Station - will be completed in 2015

ICONIC: The South Beach project - located between Raffles Hotel and Suntec City and next to the Esplanade MRT Station - will be completed in 2015

IOI said in a regulatory filing with Bursa Malaysia yesterday evening that the deal will present it with ‘an opportunity . . . to be involved in an iconic development in Singapore . . . with a sizeable mix of office, hotel, residential and retail components . . . and the opportunity of working with a leading developer in Singapore’.

IOI itself is a leading developer in Malaysia.

CDL, in its filing with Singapore Exchange (SGX), said South Beach Consortium Pte Ltd is in the process of securing a new $1.6 billion financing facility to be provided by the existing syndicate of banks which had previously extended an $800 million facility to the South Beach Consortium in June 2009.

The filings by CDL and IOI also show that their joint-venture agreement for South Beach follows the completion of IOI’s purchase of US-based Elad group’s one-third stake in the South Beach Consortium for about $173.9 million, and CDL’s acquisition of Dubai World unit Istithmar’s one-third stake in South Beach for $155 million. These transactions confirm earlier BT stories. Jones Lang LaSalle represented Istithmar and Elad.

Originally, Istithmar, Elad and CDL each held a one-third stake in the South Beach Consortium, which acquired the landmark site opposite Raffles Hotel for nearly $1.69 billion from Urban Redevelopment Authority (URA) in 2007. The bid price works out to $1,069 per square foot of potential gross floor area.

Both CDL’s and IOI’s stakes in the South Beach Consortium will be held through an entity in which CDL has subscribed a 50.1 per cent interest with IOI holding the balance 49.9 per cent. IOI will make a $174.3 million shareholder loan to this entity.

Looking ahead, CDL and IOI may be required to contribute, in proportion of their respective shareholdings in the joint venture, further funding of about $500 million each. This will be used for, among other things, redeeming the existing mezzanine notes issued earlier by the South Beach Consortium, for working capital and to finance the project’s construction.

The South Beach project – located between Raffles Hotel and Suntec City and next to the Esplanade MRT Station – was originally scheduled for completion by 2012 at a total development cost (including land) estimated at $2.5 billion.

However, in November 2008 – during the global financial crisis – CDL announced that construction would be deferred until building costs eased.

In a Feb 24 filing with SGX, CDL said the project will now be completed in 2015. The main construction contract is expected to be finalised around the middle of this year.

Based on information on the project in URA’s fourth-quarter 2010 publications, the South Beach development will have 171 apartments, 560 hotel rooms, 632,164 sq ft and 158,014 sq ft gross floor area of office and retail space respectively.

IOI’s announcement yesterday showed that as at Dec 31, 2010, South Beach Consortium had total assets of $2.02 billion and net assets of $681.8 million.

IOI, headed by executive chairman Lee Shin Cheng, is no newbie to the Singapore real estate market.

More than a decade ago, an IOI unit developed a swanky 12-storey granite office block at Middle Road/Prinsep Street called IOI Plaza, which it last year sold for $139 million.

IOI, which is a big player in the palm-oil plantations business, has teamed up with Singapore’s Ho Bee group for developing two condos on Sentosa Cove – the 151-unit Seascape which was completed about a month ago; and a 302-unit condo on the Pinnacle Collection plot – the final condo development site sold in the upscale waterfront housing district.

The condo on the Pinnacle Collection site has yet to be released for sale.

The Malaysian group is also developing a condo project in Balestier with another partner.

IOI has been looking for a mega property development in Singapore for some time. It took part in last year’s URA tender for a white site above Tanjong Pagar MRT Station, which was awarded for $1.708 billion to top bidder GuocoLand, controlled by another famous Malaysian tycoon, Quek Leng Chan.

Incidentally, Mr Quek is a cousin of CDL executive chairman Kwek Leng Beng.

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