Tanglin Shopping Centre's En Bloc Sale

CDL To Gain From Tanglin Shopping Centre’s En Bloc Sale

SINGAPORE – City Developments Limited (CDL) is expected to benefit from the ongoing collective sale of the Tanglin Shopping Centre, whether it sells its portion or makes a bid on the remaining part it doesn’t own in the office and retail project, reported The Business Times on Tuesday morning (11 January, SGT).

Notably, the mainboard-listed real estate group owns almost 35 percent of the share value and around 60 percent of the strata area in the freehold development via an indirect wholly-owned unit of its privatised hotel division Millennium & Copthorne Hotels.

If the property developer sells to a party willing to fork out a minimum of S$785 million, CDL is expected to be able to divest the ageing office and retail complex at a decent gain.

On the other hand, if it makes a bid on the freehold asset along Orchard Road, its purchase cost is expected to be lower than rival buyers as it bought Tanglin Shopping Centre’s developer 40 years ago. At present, CDL holds 85 strata office units and retail units 325 car park lots in the commercial property.

However, a serious bid by CDL to purchase Tanglin Shopping Centre would depend on whether the real estate developer deems the returns from a redevelopment to be enticing enough.

The S$785 million reserve price set by development’s owners translates to S$2,504 psf ppr based on the mixed-use development’s existing gross floor area (GFA) of 313,435 sq ft and assuming the redeveloped project is intended for full commercial use, with zero development charge (DC) payable.

According to property experts who had done back-of-the-envelope calculations, this rate would work out to breakeven costs of roughly S$4,200 psf for building office space and S$4,600 psf for constructing retail units.

At these rates, it may be hard to redevelop Tanglin Shopping Centre into a strata office and retail project.

An alternative option that is still under commercial zoning is to allocate at least 60 percent of the new project’s overall GFA for commercial uses like office space and retail units, while the remainder will be intended for other uses to be assessed by the relevant government agencies.

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