UPDATE: City Developments and CapitaLand to redevelop Liang Court

The Liang Court site in Clarke Quay. Credit: CapitaLand and City DevelopmentsThe Liang Court site in Clarke Quay. Credit: CapitaLand and City Developments

This article was originally published on Thursday, 21 November 2019 at 8:22 A.M. SGT; it has since been updated to include more details.

City Developments and CapitaLand plan to redevelop the Liang Court site after CDL Hospitality Trust agreed to sell its interest in Novotel Singapore Clarke Quay to their 50:50 joint ventures and to City Developments for S$375.9 million, the property developers said in a filing to SGX Thursday.

At the same time, Ascott Residence Trust agreed to sell part of its interest in Somerset Liang Court Singapore to City Developments for S$163.3 million, the REIT said in a separate filing said.

The full site includes the Liang Court mall, the Novotel Singapore Clarke Quay and Somerset Liang Court Singapore.

The proposed development will have two residential towers with around 700 apartment units, a commercial component, a hotel and a serviced residence with a hotel license, the developers said.

The 50:50 CapitaLand-City Developments joint ventures will own the residential and commercial segments, while Ascott REIT will own the 192-unit serviced residents and CDL Hospitality Trusts will own the 460-475 room hotel, the filing said. The gross floor area is expected to be around 100,263 square meters, the filing said.

The development will be directly linked to the Fort Canning MRT, it said.

Mr Jason Leow, President, Singapore & International, CapitaLand Group, said:

“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 center,” Jason Leow, president for Singapore and international at CapitaLand, said in the statement.

The project is expected to be completed in phases from 2024, the filing said.

The hotel will be operated under the Moxy brand by Marriott International, while the serviced residence will keep the Somerset branding, the filing said.

CDL Hospitality Trusts

Under the deal, CDL Hospitality Trusts will divest the Novotel Singapore Clarke Quay (NCQ) for S$375.9 million, 87 percent above the original purchase price of S$201 million in 2007, and above independent valuations conducted in October, the hospitality trust said in a separate filing to SGX.

The redeveloped hotel is on a forward purchase agreement, and will be acquired for the lower of S$475.0 million or 110 percent of the development costs, the filing said, adding that the S$475 million ceiling is below the expected valuation for the new hotel.

CDL Hospitality Trusts said it would use the divestment proceeds, as well as internal resources and/or debt financing, to acquire the W Singapore – Sentosa Cove hotel for S$324 million, which is below the Colliers’ independent valuation and in line with a Knight Frank valuation.

The 240-room W Hotel property offers a 3.1 percent net property income yield and is expected to result in a 0.9 percent distribution per stapled security (DPS) accretion on a pro forma 2018 basis, the trust said.

“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,” Vincent Yeo, CEO of CDL Hospitality Trusts’ manager, said in the statement.

“The proposed W Hotel Acquisition represents a rare opportunity to secure a high quality, luxury hotel in the tightly-held Singapore market. This will also preserve the majority Singapore weightage of CDLHT’s portfolio and partially mitigate the absence of income from NCQ,” Yeo added. “Moreover, the proposed redevelopment transaction and the proposed W Hotel acquisition are expected to be DPS-accretive.”

Ascott Residence Trust

Ascott Residence Trust said the estimated redevelopment cost for the serviced residence component will be around S$300 million, with the land tenure to be reset to 99 years from 57 years.

The REIT said it expect a total divestment gain and fair value gain of S$84.3 million, with the divestment price 44 percent above book value as of end-September and 138 percent above the acquisition price. It estimated an earnings before interest, tax, depreciation and amortization (EBITDA) of around 4 percent after the property’s performance stabilizes.

“Somerset Liang Court Singapore has enjoyed capital appreciation, and a healthy average occupancy rate of about 90 percent,” Bob Tan, chairman of the REIT’s manager, said in the statement.

“With revitalisation plans in place for the Singapore River and Clarke Quay precinct and the proposed construction of a new integrated development, it is an opportune time to recycle our capital into redeveloping our ageing property into a new Somerset serviced residence and refresh the land’s lease to 99 years,” Tan said. “We will strengthen our presence in a prime location in Singapore’s popular lifestyle hub.”

Ascott REIT will fund the development costs mainly with the divestment proceeds, the filing said.

On a pro forma basis, assuming the sale of Somerset Liang Court Singapore had been completed on 1 January 2018, the REIT’s distribution per unit would fall to 6.83 Singapore cents, from 7.16 Singapore cents reported, the filing said.

CDL Hospitality Trusts’ sale of the Novotel Singapore Clarke Quay is subject to unitholders’ approval, the filing said.