Hong Leong Group has inked a deal to sell Marina House at Shenton Way for $148 million, BT understands.
The buyer is believed to be a group led by niche property developer and investor Melvin Poh. Members of his consortium are said to include Victor Soh of Fortune Development.
Market watchers suggest that Mr Poh, who also led the purchase of three ageing CBD office blocks last year with an eye to redeveloping them into residential use, probably has the same intention for Marina House.
The 21-storey office block is on a site with a remaining lease of nearly 60 years.
The $148 million purchase price reflects about $1,130 per square foot based on the building’s existing net lettable area of about 130,000 sq ft. The building has a few tenants (the most prominent being Indian Airlines) but is substantially vacant – probably a deliberate strategy on the part of Hong Leong Group as it weighed various options, including the possibility of redeveloping the site into residential use.
In the end, market watchers suggest Hong Leong may have decided it made more sense to sell the property, and leave the redevelopment potential to the next owner, rather than get bogged down with having to seek approval from the authorities to top up the site’s lease to a fresh 99-year term.
In the past few years, the authorities have turned down a few applications for lease top-ups in conjunction with redevelopment proposals in the CBD, according to earlier reports.
Just a stone’s throw away from Marina House, Hong Leong Group secured approval to redevelop another of its office blocks (the former Ong Building) into apartments, which also entailed a lease upgrade. This 39-storey project, 76 Shenton, went on the market on Wednesday and the 202-unit development was sold out by yesterday evening, achieving prices ranging from about $1,600 psf to $2,600 psf.
Under Master Plan 2008, Marina House is zoned for commercial use with an 8.4 plot ratio (ratio of maximum potential gross floor area to land area). By some estimates, the $148 million purchase price could reflect a unit land cost of $1,050 psf of potential gross floor area, inclusive of a lease-upgrading premium assuming the authorities approve a lease top-up.
Some analysts suggest that a differential premium may not be payable if a conversion of the site’s use to residential use is allowed, as the building’s existing gross floor area already surpasses the Master Plan plot ratio.
Marina House was spruced up a few years ago. It was sold through a private treaty deal, believed to have been brokered by DTZ.
Last year, Mr Poh’s Fission Group teamed up with Yi Kai Group to buy Aviva Building in Cecil Street and the next-door Cecil House for a total of $101 million, in a Jones Lang LaSalle-brokered deal.
The two partners also picked up VTB Building in Robinson Road for $71 million. That deal was brokered by DTZ.
Source: Business Times, 26 Mar 2010