SINGAPORE (Nov 21): The iconic Liang Court site along River Valley Road has seen better days. But now, the 35-year-old property could get a facelift in a massive deal involving City Developments (CDL), CapitaLand, Ascott Residence Trust (Ascott REIT) and CDL Hospitality Trusts (CDLHT).
Opened in 1984, the Liang Court development comprises a shopping mall once home to the Daimaru department store in Singapore, the Novotel Singapore Clarke Quay (NCQ) hotel, and Somerset Liang Court Singapore serviced residence.
The proposed redevelopment will see the Liang Court site turned into an integrated development comprising two residential towers with 700 apartment units, a commercial component, a hotel, and a serviced residence with a hotel license.
CDLHT in forward purchase of Novotel Clarke Quay
First, CDLHT will divest its entire stake in Novotel Clarke Quay for $375.9 million to a consortium including joint venture vehicles of CDL, Capitaland, and its sponsor, the parent company of Millennium & Copthorne Hotels (M&C).
The consideration is 87.0% above the $201.0 million CDLHT paid for Novotel Clarke Quay in 2007, and also above the independent valuations by Knight Frank and Colliers International Consultancy & Valuation (Singapore) as at Oct 15, 2019.
When the redevelopment is completed, CDLHT will also acquire the new, fully developed and fitted out hotel for the either the fixed price of $475.0 million or 110.0% of the new hotel’s development costs, whichever is lower.
CDLHT is expected to recognise a total divestment gain and fair value gain of $36.3 million, following the divestment of Novotel Clarke Quay at a 12.9% premium to its previous valuation on end-December 2018.
As a whole, the proposed redevelopment transaction is expected to result in a 2.0% DPS accretion for CDLHT on a pro forma FY 2018 basis.
“Our primary objective is to retain CDLHT’s presence on the Liang Court Site, where NCQ has immensely benefitted from its prized Clarke Quay location since we acquired it in 2007,” says Vincent Yeo, CEO of CDLHT’s managers.
“We now have the rare prospect of realising the gain on our investment in NCQ, in line with our strategy to unlock underlying asset values, following the consensus of all strata title owners of the Liang Court Site on the means to realise its redevelopment potential,” Yeo says.
“Leveraging on CDL’s renowned development capabilities, we will be able to secure a turnkey hotel custom built to specifications of a ‘Moxy’ brand in 2025, with an extended land lease, coupled with a pricing formula that protects the interests of security holders, without taking on development risk,” he adds.
Ascott REIT to divest partial stake in Somerset Liang Court
Separately, Ascott REIT has also announced it has signed a put and call option agreement with CDL to divest 15,170 sqm of the site’s gross floor area for Somerset Liang Court Singapore for $163.3 million – 44% above book value and 138% above the acquisition price.
With net proceeds from the divestment, Ascott REIT will redevelop the retained GFA of 13,034 sqm into a new Somerset serviced residence with a hotel licence. The land’s lease tenure will be refreshed from 57 years to 99 years.
Upon completion, Ascott REIT’s estimated project development expenditure of the new property is approximately $300 million.
Ascott REIT is expected to recognise a total divestment gain and fair value gain of $84.3 million. The net divestment gain is $41.5 million and Ascott REIT is expected to realise a $42.8 million fair value gain from its retained gross floor area in the land.
“The new Somerset serviced residence will be part of an iconic riverfront integrated development set to be the next landmark in Singapore,” says Beh Siew Kim, CEO of Ascott REIT’s manager.
“With a hotel licence, the Somerset property will also have the flexibility to cater to travellers on short stays. It will offer the comfort of a home, apartments with kitchen, quality services and flexibility in the duration of leases,” she adds.
New Liang Court integrated development
The new proposed integrated development, which is targeted to open in phases from 2024, will have a total gross floor area of 100,263 sqm.
Upon completion, the 50:50 CDL-CapitaLand joint venture entities will own the residential and commercial components.
Ascott REIT will own the 192-unit serviced residence with a hotel licence, while CDLHT will own the hotel, which will have about 460 to 475 rooms, under a forward purchase agreement with CDL.
The hotel will be operated under the Moxy brand by Marriott International, while the serviced residence will retain its Somerset branding.
“Liang Court sits on a prime site with a coveted dual-frontage facing Singapore River and Fort Canning Hill. Its redevelopment offers CapitaLand a prized opportunity to deliver an upmarket, high-rise riverfront residential development that comes with stunning views of Singapore River and the city centre,” says Jason Leow, President, Singapore & International, CapitaLand Group.
“After our recent sales success at Sengkang Grand Residences, we are honoured to be partnering CapitaLand on yet another integrated development that will redefine Clarke Quay, one of Singapore’s most exciting entertainment precincts,” says Sherman Kwek, CDL Group CEO.
“By harnessing the strengths and capabilities of all the partners involved, we plan to transform the site into an iconic landmark along the Singapore River,” he adds.
As at 9.57am, shares in CapitaLand are trading 6 cents or 1.6% lower at $3.60, shares in CDL are trading 10 cents or 0.9% lower at $10.51, units in CDLHT are trading 1 cent or 0.6% higher at $1.60, and units in Ascott REIT are trading flat at $1.31.