EL Development plans a hotel with over 300 rooms on Hill St

The mid- to high-end business hotel is slated for completion in the third quarter of 2021

Sat, Feb 24, 2018

Kalpana Rashiwala

EL Development is planning to develop a mid- to high-end business hotel with more than 300 rooms on the Hill Street site that it is buying for S$118 million from Singtel.

"We have not finalised on the concept for the hotel and are also in the process of sourcing for an operator," said EL Development managing director Lim Yew Soon.

He added that the price works out to about S$1,855 per square foot per plot ratio inclusive of an estimated S$140 million that is payable to the state, comprising a differential premium (to change the use of the site) and a lease upgrading premium (for one of the site's two land lots).

Singtel's Hill Street property has a total land area of 39,738 sq ft comprising two land lots. The smaller plot of 14,717 sq ft has 36 years left on its original 99-year lease. The Singapore Land Authority has granted in-principle approval to top up this plot's lease to 99 years subject to payment of the lease upgrading premium.

The larger plot, at 25,021 sq ft, has 999-year leasehold tenure. However, Singtel is selling only a 99-year leasehold interest to EL Development for this plot - the telco will have reversionary interest in the land.

Both plots are currently zoned for "utility" use in the Urban Redevelopment Authority's Master Plan 2014.

Last year, URA granted Singtel provisional permission for a redevelopment proposal on its Hill Street property with a 3.5 plot ratio, which translates to a maximum allowable gross floor area of 139,084 sq ft. The approval was for a 172-room hotel and over 2,000 sq ft of retail space.

EL Development plans to submit a fresh planning application to URA with its own proposal for a hotel development of over 300 rooms.

Mr Lim expects the total development cost - including construction costs, the expenditure to fit out the hotel as well as interest expense - to be between S$320 million and S$360 million.

Singtel will be leasing back the property - comprising a black tower block housing Singtel's Central Exchange and two lower-rise buildings used as offices - until mid-2019.

EL Development expects to start redeveloping the site in July next year and to complete the project in the third quarter of 2021, Mr Lim said.

The group plans to retain the asset for recurring income in the short term, but also has its eye on capital appreciation in the longer term "We're open to selling the asset later if the price is right," said Mr Lim.

This will be EL Development's first hotel development as well as its maiden investment property. To date, the company has developed industrial and residential projects in Singapore for sale.

"It has always been the intention of the company to expand into property investments and holdings instead of merely developing properties for sale," he added.

EL Development was set up in 2007, initially as a fully-owned subsidiary of building contractor Evan Lim & Co, but later spun off as an independent company so that it could build up its brand and reputation as a property developer.

"The hospitality business is a good avenue for the company to participate in Singapore's future growth by owning a property for long term and for possible future capital gains while enjoying recurring income in the short term."

He noted the dearth of hotel sites in Singapore, especially in the central area.

"Hill Street is within Singapore's civic and cultural district, and it is also near the Orchard Road shopping belt and the financial district. So the site has a lot of potential to attract tourists visiting Singapore for both leisure and business. Furthermore, the City Hall MRT station is mere minutes' walk away."

The group is keen on more hotel investments in Singapore as well as other major international cities.

It is also on the lookout for commercial sites in Singapore to develop into offices and retail space.

CBRE was the exclusive advisor to Singtel for its public tender for the Hill Street property's sale. The tender closed in December last year and was awarded to EL Development last month. Galven Tan, CBRE's director of capital markets, Singapore, said: "The tender drew more than 10 bids - from property developers and hotel operators in Singapore and the Asia-Pacific region. The strong turnout is reflective of the rarity of hotel development sites in Singapore and the site's attractive location."