City Developments to redevelop Central Mall area into large-scale mixed-use project

An aerial view of City Developments' Central Mall and Central Square. Credit: City DevelopmentsAn aerial view of City Developments' Central Mall and Central Square. Credit: City Developments

City Developments plans to redevelop its Central Mall properties and the surrounding area into a large-scale mixed-use project after its proposed acquisition of Central Square for S$315 million, the property developer said in a press release Thursday.

Central Square, located at 20 Havelock Road, is currently a 99-year leasehold development with serviced residence, office and retail space, with 72 years remaining on its lease, the release said.

City Developments, via its wholly owned subsidiary CDL Constellation, has entered a put-and-call option agreement to buy the asset from Far East Hospitality Trust for S$313.2 million, and to acquire the reversionary leasehold interest from Far East Orchard subsidiary OPH Riverside for S$1.8 million, the statement said. In addition, an incentive payment of S$18 million may be made, subject to conditions, including getting planning approval for residential use, the filing said.

The transaction is expected to be completed in the first quarter of 2022, the statement said.

The property developer already owns the 81,660 square foot Central Mall site, which includes the freehold seven-storey Central Mall office tower and a cluster of conservation shophouses on a 99-year leasehold site, with 71 years remaining, the statement said.

“The strategic acquisition of Central Square crystallises our master plan to shape the precinct’s transformation into a new and vibrant lifestyle hub. This rare placemaking opportunity augments our role in rejuvenating the Singapore River precinct and aligns with our enhancement strategy to unlock the latent value of our matured assets,” Sherman Kwek, group CEO of City Developments, said in the statement.

“With the enlarged site, we can take a multi-faceted approach to the planning and design of the entire area and shape the public realm to maximise value for all stakeholders in this precinct,” Kwek said.

The site is in close proximity to three MRT stations, Clarke Quay, Fort Canning and Chinatown, the developer said.

In a separate statement, Far East Hospitality Trust said the consideration was a 57.9 percent premium on the independent valuation of S$198.3 million as of end-2020, and a 70.8 percent premium on the original purchase price of S$183.3 million in 2012.

FEHT said it expected to post an estimated net gain of S$112 million.

“This transaction allows us to realise significant value for our stapled securityholders. The strong divestment gain highlights the latent value and potential of our assets. The proceeds will be used to first pare down Far East H-Trust’s debt to strengthen its balance sheet,” Gerald Lee, CEO of FEHT’s manager, said in a statement filing to SGX.

“With the increased financial flexibility, the managers can seek out opportunities to redeploy the proceeds to higher yielding assets to improve the performance of the trust,” he added.

After the deal is completed, the trust’s portfolio will hold nine hotels and three serviced residences in Singapore with a total portfolio value of S$2.3 billion, the statement said.