Newsbreak: IOI Properties gains ground in proposed Singapore JV

This article first appeared in The Edge Malaysia Weekly, on March 12, 2018 - March 18, 2018.
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AFTER some setbacks, property developer IOI Properties Group Bhd is said to be making headway with its proposed joint venture in Singapore worth at least S$2.84 billion (RM8.43 billion).

The developer is believed to have reached long-term financing deals with five banks to the tune of S$1.6 billion, people familiar with the matter tell The Edge.

The five are DBS Bank, United Overseas Bank, Bank of Tokyo-Mitsubishi UFJ, OCBC and Sumitomo Mitsui Banking Corp. That leaves another S$300 million in financing that is being negotiated with Bank of China, the people say.

To recap, IOI Properties said on June 12 last year that it was teaming up with Hongkong Land Holdings Ltd (HKL) — a property investment, management and development group listed on the London Stock Exchange — for the proposed project. The finalisation of the partnership is subject to regulatory approvals as well as the fulfilment of other conditions precedent.

The proposed partnership sought to jointly own and develop a 1.09ha parcel in Singapore’s Marina Bay financial district.

IOI Properties had successfully tendered for the parcel in November 2016 for S$2.84 billion via its wholly-owned subsidiary, Wealthy Link Pte Ltd.

The developer said the land tender was “an opportunity for the group to venture into prime office tower development with complementary mixed-use development in the central business district of Singapore with close proximity to prestigious commercial developments such as One Raffles Quay and Marina Bay Financial Centre”.

It had borne the cost alone via bridging financing, which pushed its short-term borrowings from RM464.45 million as at June 30, 2016, to RM8.69 billion as at Dec 31, 2017.

If IOI Properties’ proposed partnership with HKL proceeds, the latter would share 33% of the land cost, injecting S$940 million.

That would leave S$1.9 billion for IOI Properties to bear, of which S$1.6 billion is now in hand, sources say.

As part of the proposed partnership, IOI Properties would get four board seats on the joint-venture vehicle and HKL, two seats.

Last August, HKL said that two office towers with a net floor area of 1.26 million sq ft plus 30,000 sq ft of retail podium space are expected to sit on the land.

The development will also have direct connectivity to HKL’s other properties in the district — the 1.09ha parcel is located between One Raffles Quay and Marina Bay Financial Centre, both of which are managed by HKL.

Last Friday, IOI Properties closed at RM1.83 per share, giving it a market capitalisation of RM10.07 billion. Its stock price has declined 10.7% from RM2.05 on Feb 22, but is only 0.88% lower than the past year.

For the second quarter ended Dec 31, 2017 (2QFY2018), IOI Properties posted a net profit of RM109.14 million, down 60% year on year. It attributed the decline to lower contribution from its overseas properties and a RM79.7 million impairment loss from a joint venture. Revenue was 40.8% lower at RM707.44 million.

In the same quarterly report, the developer states that the proposed joint venture with HKL was pending the fulfilment of unspecified conditions precedent.

In its March 8 release of preliminary results for the year ended Dec 31, 2017, HKL says conditions precedent to the proposed joint venture to develop a 120,00 sq m land parcel within Singapore’s financial district “are yet to be fulfilled”.

HKL’s market capitalisation was US$16.52 billion last Friday. Part of the Jardine Matheson group, it traces its history as far back as 1889.

HKL owns and manages 800,000 sq m of prime office and luxury retail properties across Asia. It has secondary listings in Bermuda and Singapore.

There is urgency in getting the proposed partnership finalised and the proposed development underway.

According to IOI Properties in November 2016, Singapore’s Urban Redevelopment Authority (URA) has imposed an 84-month deadline, or seven years, for successful land tenders to complete their proposed projects.

Breaching any tender conditions, including missing the seven-year deadline, would allow the URA to repossess the land as if there had not been a tender process. In that scenario, any payments made to the URA may also be forfeited.

Based on past Bursa Malaysia filings, S$400 million or 5% of the tender amount was deposited when the tender document was submitted. Payment for another 25% of the tender amount was required within 28 days after the tender is successful. The URA requires the balance to be settled within 90 days after, filings show.

 

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