Yahoo Finance Local mega projects could boost AUM/ FUM for local asset managers
Two mega projects, on Orchard Road and in Jurong Lake District could provide fee income and AUM for the right manager
When Hotel Properties H15 released its result for FY2023 on Feb 27 this year, it didn't go unnoticed that the group had revalued upwards its investment properties on Orchard Road. Forum was revalued to $948 million as at end-Dec 2023 from $413 million a year earlier, and HPL House was revalued upwards to $275 million from $128 million as at end-FY2022.
Altogether, HPL booked a net fair value gain of $645 million.
The gain was made following an announcement in August last year that HPL had received the Grant of Provisional Permission (PP) for the redevelopment of the Forum, voco Orchard Singapore and HPL House by the URA under the Strategic Development Incentive (SDI) Scheme, subject to certain terms and conditions.
The combined site of the properties, all freehold land and a 999-year leasehold land located along Orchard Road and Cuscaden Road, has a total land area of 14,027.12 square metres or 150,986.66 square feet.
The project's gross development value including the land cost is likely to run into billions. In August last year, HPL had said the approval is for a comprehensive mixed redevelopment comprising hotel, retail, office and residential components in two tower buildings of 64 storeys and 43 storeys on a 6-storey podium with a rooftop garden, a performance theatre and basement carpark. A separate 29-storey tower will be erected over the contiguous basement carpark.
The total approved gross floor area for the proposed mixed development is approximately 114,153.38 square metre (1,228.736.71 square feet).
HPL is likely to line up capital partners for the project, market watchers reckon. Middle Eastern and Hong Kong funds are believed to be interested. Whether CapitaLand Development or CLA Real Estate Holdings (CLA), the parent of CLD and Capitaland Investment (CLI), takes part remains to be seen. CLA has partnered HPL and Mapletree Investments to acquire real assets from Singapore Press Holdings.
Additionally, CLI itself could form a partnership or private equity fund to take a small stake and manage the development all the way to leasing out the completed properties and stabilising them.
Elsewhere in Singapore, a five-party consortium comprising CLD, Frasers Property Tq5 (FPL), City Developments (CDL), Mitsubishi Real Estate and Mitsui Fudusan (Asia) have put in two bids for a master-developer site in Jurong Lake District. The consortium is the only bidder.
CLD, CDL and FPL will each own 25% in the joint venture (JV) while the two Japanese headquartered developers will each hold the remaining 12.5% in the JV.
“Based on our back of the envelope calculations, the entire development could achieve a future gross development value of up to $8.2 billion to $9 billion, implying land value of close to $3 billion to $3.8 billion or $775 psf per plot ratio to $972 psf ppr for the entire site,” says a note by DBS Group Research.
The dual-envelope, concept-and-price tender exercise will be under consideration by the authorities of which the bid price will be revealed in time.
The 6.5 hectare white-site can be developed to a maximum gross floor area (GFA) of close to 365,000 sqm (3.93 million sq ft), will consist of a mix of office (minimum of 1.57 million sq ft), residential (up to 1,700 units) and other commercial components will be developed in phases over the next 10-15 years.
DBS believes that continued government support in the form of incentives to drive business relocations and growing the critical mass of companies, workers and captive population in the Jurong Lake District will be a positive for the consortium.
Among the consortium, DBS estimates that CDL and FPL may have to recycle assets to invest in the JV. Of the two, FPL has been more adept at recycling. Since the start of the year, FPL has divested its stake in Nex to Frasers Centrepoint Trust J69u and has announced the divestment of 89.9% in four German warehouses to Frasers Logistics and Commercial Trust.
The project management could go to Surbana Jurong. Or CLI could create a development fund, and take stakes in both the Orchard Road project and the Jurong Lake District project, thereby receiving both fee income and achieving higher funds under management.
As at end-Feb, CLI’s FUM was $100 billion, and its AUM at $134 billion. It has a target of $200 billion in FUM by 2029. Managing Singapore’s mega projects could go some way towards that goal.
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