Loss-making OUE to dispose of freehold site

A FREEHOLD residential site valued at $261.1 million has been earmarked for disposal by Overseas Union Enterprise (OUE).

In a statement to the Singapore Exchange (SGX) yesterday, the mainboard-listed company disclosed it was engaged in preliminary discussions about the 'possible disposal of its residential site at 21 Angullia Park'.

OUE paid a hefty $228.1 million, or $1,735 per sq ft (psf) of potential gross floor area, two years ago for the site of The Parisian condominium.

In the half-year financial report ended June 30, the site is valued at $261.1 million.

The company admitted it was looking to dispose of the land in response to a query from SGX, prompted by a 57 per cent jump in its share price last Friday to $14.50.

In stark contrast to its second-quarter net profit of $12.1 million a year ago, the company posted a net loss of $47.8 million for the same period this year.

Revenue also fell some 25 per cent year-on-year to $28.5 million for the three months ended June 30, largely due to weak sales from a hospitality unit battered by the downturn and the Influenza A (H1N1) epidemic.

Second-quarter losses at OUE were also attributed to the recognition of some $52.5 million in impairment losses for two development properties - The Parisian and The Grangeford, a 99-year leasehold condominium with 192 units. The Grangeford was bought in late 2007 for $592 million, or $1,820 psf per plot ratio.

The group's property investments division saw rental income in the second quarter fall to $12,000 from $200,000 a year earlier.

OUE reported that it received no revenue from the sale of development properties in the second quarter, as it had yet to launch its residential projects.

The company originally planned to launch a luxury condominium project on the Angullia Park site, for which it paid top dollar in 2007 during the peak of the property cycle. The global crisis, however, seemingly put paid to its plans.

In June, it announced that it obtained a term loan facility for up to $300 million secured against its two properties in the Orchard Road area. About $165 million was used to refinance a loan related to the acquisition of The Parisian.

Yesterday, OUE said it was reviewing its overall financial strategy, but that it had yet to reach a conclusion.

It would make an announcement at the appropriate time and in compliance with its listing requirements.

OUE shares lost $4.50, or 31 per cent, to close at $10 at the end of trading yesterday.

Source: Straits Times, 6 Oct 2009