The Verge sold for S$317m, to make way for serviced residences

The Verge, a struggling mall in Little India, is being sold for S$317 million to a company controlled by Keith Tang, grandson of CK Tang founder Tang Choon Keng and who owns a chain of hotels and serviced apartments in Australia and New Zealand.

Mr Tang is expected to assemble a consortium for the purchase and redevelopment of The Verge, which is on a site with about 80 years’ balance lease. He plans to redevelop the property into “Studio by Tang” serviced apartments, a mall and a Signature block which is likely to be offices or retail but could also include medical suites, said Leslie Ang, a spokesman for Mr Tang. The proposed scheme will also feature an urban beach.

The gross development value of the new project is estimated at S$480 million or about S$1,920 per square foot of potential gross floor area, according to Mr Ang.

Mr Tang is making the acquisition of The Verge through a Singapore-incorporated vehicle, Evolutyon Real Estate Investment Holding, via a sale of shares in Corwin Holding, which owns The Verge, formerly known as Tekka Mall.

Corwin’s three shareholders – the largest of which is a fully-owned subsidiary of DRB-Hicom – have entered into a conditional share sale agreement for the proposed disposal of the entire equity interest in Corwin to Evolutyon for a total indicative sale consideration of S$317 million. This translates to S$1,329 psf based on the existing gross floor area of 238,527 square feet.

The DRB-Hicom unit owns about 90 per cent of Corwin with Singapore, home-grown retailer Mohamed Mustafa and Samsuddin Co and BI Distributors each holding around 5 per cent. BI Distributors is owned by Mustafa boss Mustaq Ahmad and his wife.

In a media statement, Mr Ang said: “The seller has previously obtained outline planning permission for a serviced apartments, commercial and retail project.”

The 66,662 sq ft site is zoned for white use with a 3.5 plot ratio. “We expect to take possession of the site probably in Q1 2016 and work could start in 2017 and last around three years,” said Mr Ang. “The acquisition represents a golden opportunity for Mr Keith Tang and his team to strategically unlock value and effectively realise the great potential of what is a prominently-located asset . . . ,” Mr Ang said. The site is next to Rochor Station on Downtown Line 2.

The plans also include creating a large media wall at the project – subject to approval from the authorities.

“Commercial real estate investment trusts will be eyeing such assets,” said Mr Ang, hinting at a possible exit strategy for the project after it has been completed and the asset has stabilised.

This will be Mr Tang’s first commercial property project in Singapore. His New Zealand-based Heritage Group owns about 20 hotels and serviced apartments in Australia and New Zealand.

In a regulatory filing with Bursa Malaysia on Monday, DRB-Hicom said that the indicative consideration for S$317 million was arrived at after taking into consideration the audited net assets of Corwin as at March 31, 2015 of about S$55.42 million, Corwin’s audited net profit for the year ended March 31, 2015 of around S$30,470, Corwin’s unaudited net assets of S$56.14 million as at Nov 30, 2015 and the agreed value of The Verge at about S$295.60 million which is to be free from encumbrances and after deducting the relevant expenses for the transaction.

The completion of the transaction is subject to conditions including the “satisfactory results of the purchaser’s due diligence exercise on Corwin, its business and assets at the purchaser’s sole discretion”.

Hicom Holdings group – before it became DRB-Hicom – clinched the white site, dubbed Tekka Corner, at an Urban Redevelopment Authority tender in 1996 for S$84 million.

After obtaining approvals for an office and retail project, Hicom Holdings put the site up for sale in September 1998 – taking advantage of a temporary measure during the Asian Financial Crisis to allow the reassignment of state land parcels. But that attempt failed.

In 2000, Corwin Holdings received provisional permission from URA to develop a retail project. The project opened as Tekka Mall in 2003 but ran into problems attracting shoppers. In 2009, it was relaunced as The Verge, with the goal to reposition it as an IT, lifestyle and F&B Hub.

Today, the most famous tenant at the mall is Sheng Siong Supermarket, but there are also night clubs and karaoke lounges.

Chestertons Singapore managing director Donald Han welcomed Mr Tang’s redevelopment, saying an integrated mixed development will better manage risks. “There is too much retail component at the moment.”

Serviced apartments will do well given the fringe-CBD, Little India heritage location. “That area is becoming quite hip, with a lot of boutique hotels in the Dickson Road vicinity. What we need is something more organised, like serviced apartments providing longer stay,” said Mr Han.

He suggested that serviced apartments account for 60 per cent of the redevelopment project, with a downscale retail component of not more than two floors, plus a minimal office component. “If done correctly, this could be an icononic gateway to Little India,” said Mr Han.

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