Liang Court site in Clarke Quay to be turned into mixed-use development with 700 apar

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Liang Court site in Clarke Quay to be turned into mixed-use development with 700 apartments

PUBLISHED 3 HOURS AGO


SINGAPORE - Property heavyweights City Developments Limited (CDL), CapitaLand and Ascott Residence Trust (Ascott Reit) said on Thursday (Nov 21) that they will together redevelop the Liang Court site in Clarke Quay.

The site comprises Liang Court mall, midscale hotel Novotel Singapore Clarke Quay and serviced residence Somerset Liang Court Singapore.

Subject to approval from the authorities, the Liang Court site will be turned into an integrated development with total gross floor area (GFA) of 100,263 sq m.

The proposed project will comprise two residential towers offering some 700 residential units, a commercial component, an "upper midscale" hotel with 460 to 475 rooms, and a 192-unit serviced residence with a hotel licence.

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

The proposed mixed-use project will open in phases from 2024.

The new hotel will be operated under the Moxy brand by Marriott International when it is completed around 2025, while the new serviced residence will keep its Somerset branding when it opens in the second half of 2024.

The deal involves CDL Hospitality Trusts (CDLHT) selling its entire stake in Novotel Singapore Clarke Quay to the 50:50 CDL-CapitaLand joint venture (JV) entities and CDL.

At the same time, Ascott Reit, which is a wholly owned subsidiary of CapitaLand, will sell part of its interest in Somerset Liang Court Singapore to CDL. Ascott Reit said it signed a put-and-call option agreement with CDL to sell 15,170 sq m of the site’s GFA for $163.3 million to CDL, and retain 13,034 sq m of GFA.

The residential and commercial components of the new development will be owned by the 50:50 CDL-CapitaLand JV entities, while the service residence will be owned by Ascott Reit. CDLHT will own the hotel under a forward purchase agreement with CDL.

Ascott Reit said in its filing that it will use its net proceeds from selling part of its interest in Somerset Liang Court Singapore to develop the serviced residence, from the retained 13,034 sq m of GFA. The land's lease tenure will be refreshed from 57 years to 99 years. Upon completion, the estimated project development expenditure of the new serviced residence will be about $300 million.

Ascott Reit noted that the existing Somerset Liang Court is an ageing serviced residence and has been facing competition from newer hotels.

Along with the redevelopment, the consortium will also rejuvenate the river promenade next to the property, in line with the Urban Redevelopment Authority's Draft Master Plan 2019 to enhance the area's vibrancy.

The promenade's facelift is expected to generate social activities around the proposed integrated development, increase footfall and improve pedestrian accessibility along the Singapore River.

Within the Singapore River precinct, CDL owns Central Mall, an office-and-retail development along Magazine Road, while CapitaLand has a stake in the Clarke Quay mall - housed within five blocks of shophouses - through CapitaLand Mall Trust and a stake in Park Hotel Clarke Quay through Ascott Reit.

The Liang Court site marks another collaboration between CDL and CapitaLand, after their successful joint bid last year to develop a commercial and residential site in Sengkang Central atop Buangkok MRT station.

CDLHT is managed by subsidiaries of Millennium & Copthorne Hotels, which is the hotel arm of the CDL group.

Separately, CapitaLand announced on Wednesday that it is selling The Star Vista mall to New Creation Church’s business arm for $296 million.

Shares of CapitaLand fell $0.02 or 0.5 per cent to $3.66 on Wednesday, while CDL ended down $0.24 or 2 per cent at $10.61. Units of Ascott Reit lost $0.02 or 1.5 per cent to close at $1.31.

[reporter2]

LIANG COURT REDEVELOPMENT

CapitaLand, CDL, Ascott Reit to redevelop Liang Court

Site will be turned into an integrated development with total GFA of 100,263 sq m, subject to approval

FRI, NOV 22, 2019

FIONA LAM
NG REN JYE


REAL estate heavyweights CapitaLand Limited, City Developments Limited (CDL) and Ascott Residence Trust (Ascott Reit) have formed a consortium to redevelop the Liang Court site, according to filings on Thursday.

The site comprises Liang Court mall, mid-scale hotel Novotel Singapore Clarke Quay and serviced residence Somerset Liang Court Singapore.

This comes as CDL Hospitality Trusts (CDLHT) has proposed to sell its entire stake in Novotel Singapore Clarke Quay to the 50:50 CDL-CapitaLand joint ventures (JVs) and CDL.

At the same time, Ascott Reit will sell part of its interest in Somerset Liang Court to CDL. Under a put and call option agreement, Ascott Reit will sell 15,170 square metres (sq m) of the serviced residence site's gross floor area (GFA) for S$163.3 million to CDL, and retain 13,034 sq m of GFA.

The Liang Court site will be turned into an integrated development with total GFA of 100,263 sq m, subject to approval from the authorities. This will comprise two residential towers offering some 700 apartments, a commercial component, an "upper midscale" hotel with 460 to 475 rooms, and a 192-unit serviced residence with a hotel licence. The land's lease tenure will be refreshed from 57 years to 99 years.

The CDL-CapitaLand JV will own the residential and commercial components. Ascott Reit, a wholly-owned subsidiary of CapitaLand, will own the new serviced residence. CDLHT, an associate of CDL, will own the new hotel under a forward purchase agreement with CDL.

The proposed mixed-use project will open in phases from 2024.

The new serviced residence will keep its Somerset branding when it opens in the second half of 2024, while the new hotel will be operated under Marriott International's Moxy brand - a lifestyle boutique hotel concept focusing on next-gen travellers including millennials - when it is completed in 2025.

Ascott Reit will use its net proceeds from selling part of its interest in Somerset Liang Court to develop the new serviced residence, from the retained 13,034 sq m of GFA. The project development expenditure of the new serviced residence is estimated to be S$300 million. Ascott Reit noted that Somerset Liang Court is an ageing property and has been facing competition from newer hotels.

Along with the Liang Court site redevelopment, the CapitaLand, CDL and Ascott Reit consortium will also rejuvenate the river promenade next to the property.

In a separate filing, CDLHT said it is looking to sell Novotel Singapore Clarke Quay for S$375.9 million to the consortium as part of the site redevelopment. The 403-key hotel has a GFA of 34,909 sq m and a lease expiring on May 1, 2077.

The Novotel sale price is 87 per cent more than the original purchase price of S$201 million in 2007. It is also 1.9 per cent and 1.4 per cent higher than the independent valuations by Colliers International and Knight Frank respectively.

Net proceeds from the divestment will be some S$369.3 million, CDLHT said. At the discretion of its managers, a portion of these proceeds may be used to make distributions to CDLHT stapled securityholders.

The Novotel sale is expected to be completed in April 2020.

Meanwhile, once the new hotel is fully built in Novotel's place, CDLHT will purchase the property at the lower of either S$475 million or 110 per cent of actual development costs incurred in developing the new hotel. This will be funded through debt financing.

Separately, CDLHT also said on Thursday that it will buy the W Singapore luxury hotel in Sentosa Cove for S$324 million from Cityview Place Holdings, a wholly-owned subsidiary of CDL.

The W Singapore acquisition will be funded by internal resources, including proceeds from the Novotel sale and/or debt financing. This deal will likely be completed in early-2020.

W Singapore, managed by Marriott, has 240 rooms and a GFA of 25,374 sq m. Its 99-year lease began on Oct 31, 2006.

CDLHT will hold extraordinary general meetings in January 2020 to seek approval from its stapled securityholders for the Novotel sale and W Singapore purchase.

Both deals will enable CDLHT to further penetrate the lifestyle hotel market at different tiers or price points in Singapore amid growing global demand for lifestyle hotels with strong identities and story-telling potential, the trust said.

Its pro forma gearing would be lower at 35.3 per cent, with the W Singapore purchase and Novotel sale, and before the acquisition of the new hotel. This leaves ample debt headroom of S$512.7 million, assuming a 45 per cent gearing limit for CDLHT as a whole. The trust will then have the flexibility to pursue suitable acquisitions to further grow its income base, it said in its filing.

Shares of CapitaLand fell S$0.04 or 1 per cent to S$3.62 on Thursday after the announcement, while CDL ended down S$0.11 or 1 per cent at S$10.50. Units of Ascott Reit were flat at S$1.31, and CDLHT closed unchanged at S$1.59.

[reporter2]

HOCK LOCK SIEW

Liang Court's rejuvenation to unlock value, yield synergies

FRI, NOV 22, 2019

NISHA RAMCHANDANI


CITY Developments Limited (CDL) and CapitaLand's plans to team up with Ascott Residence Trust (Ascott Reit) to turn the Liang Court complex into an integrated development probably didn't come as a massive surprise to market watchers.

The duo's S$400 million purchase of Liang Court mall in May from an entity linked to PGIM Real Estate already sparked expectations that the commercial and residential-zoned site would be redeveloped to unlock value, especially given its attractive location at Clarke Quay and along the Singapore River.

The existing Novotel Singapore Clarke Quay (NCQ) hotel and Somerset Liang Court Singapore serviced residence at the site are owned by CDL Hospitality Trusts (CDLHT) and Ascott Reit respectively. CDLHT is looking to divest NCQ to the 50:50 CDL-CapitaLand joint venture and CDL while Ascott Reit will sell part of its stake in Somerset Liang Court to CDL.

When the new development comes onstream in phases from 2024, it will feature 700 residential apartments across two towers, a retail component as well as a hotel under Marriott's Moxy brand and a new Somerset serviced residence.

Ascott Reit will own the 192-unit serviced residence, while CDHLT is to buy the upper mid-scale Moxy hotel for either S$475 million or 110 per cent of the hotel's development costs. whichever is lower.

The different components of the project should dovetail nicely, with residents and hotel guests fuelling business for the retail component, and its location in the Clarke Quay riverside area attracting tourists.

For CapitaLand and CDL, the integrated development will allow them to reap recurring income from the commercial component, as well as profits from residential sales, analysts highlighted.

Amid stiff competition in the market, CDLHT and Ascott Reit will be able to replace ageing hospitality properties with new assets that have a fresh 99-year lease term. The land's remaining lease tenure is 57 years and without redevelopment, the two hotel properties will likely require sprucing up in time, which would require capital expenditure.

Meanwhile, CDLHT will derive a divestment gain of S$36.3 million from the sale of NCQ, which will be used to pare down existing debt and fund future acquisitions, including the W Singapore - Sentosa Cove which it is buying from CDL for S$324 million. The W Hotel is expected to deliver a distribution per security (DPS) accretion of 0.9 per cent (on a pro forma FY18 basis), which will also help to mitigate the decline in DPS from the divestment of NCQ.

However, the divestment of NCQ will result in a drop of DPS and therefore it is likely that part of the proceeds from CDLHT's divestment gain could be used as distributions to security holders. The acquisition of both the W and Moxy hotels are yield accretive, and would deliver a 2.7 per cent DPS accretion on a pro forma FY 2018 basis.

In the case of the W Hotel acquisition, the entry net property income (NPI) yield seems a bit low at 3.1 per cent, while there is also competition on Sentosa island from other new hotel properties, noted RHB Securities analyst Vijay Natarajan. Still, Mr Natarajan reckons that the luxury hotel could do well in the mid-to-long term if the tourism sector remains strong, especially given the government's plans to redevelop Sentosa and Pulau Brani as well as the upcoming Greater Southern Waterfront.

The NPI yield for NCQ and the pro forma stabilised NPI for the upcoming Moxy hotel both stand at 5.6 per cent.

CDLHT's acquisition of the W Hotel - and come 2025, the new Moxy hotel - allows it to maintain its exposure to Singapore as it bets on the long-term prospects of the tourism industry here. All this comes as Singapore's hotel industry is seeing a tapering in hotel room supply, with a low compound annual growth rate of 1.3 per cent over the next four years, contributing to a recovery in the hotel sector.

Meanwhile, Ascott Reit benefits from the partial sale of 15,170 square metres in Somerset Liang Court for S$163.3 million, which translates to a net gain of S$41.5 million. This strengthens its balance sheet for future acquisitions, a DBS report highlighted.

The W Hotel acquisition and NCQ divestment will lower CDLHT's pro forma gearing to 35.3 per cent from 36.3 per cent as at Sept 30, leaving it with debt headroom for further growth.

The deal is still subject to the necessary approvals.

But ultimately, it makes sense, and delivers enough promise to each of the partners to make the Liang Court redevelopment a win-win for all.