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City Developments (CDL) could gain S$177 million from the outright sale of Katong Shopping Centre, said Credit Suisse in a report.
In a report by the local media on Wednesday (8 June), it was said that Katong Shopping Centre may once again be put up for collective sale, this time for around S$630 million, or S$2,333 per sq ft per plot ratio.
Opened in 1973, the complex has 425 strata-titled units, of which 60 units is owned by CDL, as well as 323 carpark lots at the complex.
“Based on a sale at S$2,000 per sq ft (as a conservative measure, assuming lower apportionment of share value) and CDL’s owned strata area of 88,727 sq ft, we believe CDL could see sale proceeds of S$177 million,” said Credit Suisse.
Since CDL holds all its investment properties on a historical costs basis, Credit Suisse expects book value to be negligible, with sale proceeds ‘likely to flow-through to the bottom-line.’
“Note that in 2005, the fair value of these units was assessed at merely S$27.6 million, while our current RNAV estimates incorporate a value of S$76 million.”
However, Credit Suisse said the likelihood of completion of the sale was not high. “We highlight that this is the third attempt at a collective sale for the complex, with previous attempts in 2011 and 2014 similarly achieving the requisite approval from its owners.”
“Hence, we believe pricing remains the key determinant today, given the sizable asking price and redevelopment risk, amidst a weak retail environment.”
Nonetheless, it does not rule out a redevelopment by CDL, given the property’s freehold tenure and sizable size, with limited new sites available within the vicinity of the residential enclave, the report said.
It noted that this would also be in line with “CDL CEO Grant Kelley’s goal of acquiring more commercial assets in the current environment,” Credit Suisse said.
Correction: An earlier version of this article misstated that Katong Shopping Centre was developed by CDL. The Singapore-listed developer did not build the property. It owns about 35 percent of share value in the shopping centre through its ownership of at least 60 commercial units and 323 car parking lots.
Nikki De Guzman, Editor at CommercialGuru, edited this story. To contact her about this or other stories email nikki@propertyguru.com.sg
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