News Analysis: Unlocking treasure trove
- Freehold Tanglin Shopping Centre successfully sold in its fourth attempt at a collective sale for S$868m / S$2,769 psf ppr, 10% above the reserve price
- Tanoto family’s Pacific Eagle Real Estate won the tender over 5 other bids
- City Dev likely to unlock a handsome gain from its 35% share value and likely more to come, in our view.
- Maintain BUY; TP of S$10.50
Tanglin Shopping Centre sold to Tanoto family with redevelopment potential. The freehold Tanglin Shopping Centre has been successfully sold today in its fourth attempt at a collective sale. The successful bid came from Tanoto’s Family, Pacific Eagle Real Estate (Pacific Eagle) for S$868m / S$2,769m psf ppr. The price is about 10% above the reserve price. The tender was keenly contested with 5 bids including from Far East Organization and Perennial Holdings, according to Business Times.
Tanglin Shopping Centre has an existing 313,435 sqft (plot ratio of 4.57) on a commercial site which can ben developed into a new commercial building with 60% GFA for commercial use and the remaining 40% for residential and serviced apartment / hotel use, according to theEdge. Tanglin Shopping Centre is the second oldest shopping mall in Singapore, after People’s Park Complex, who enjoys two frontage along Tanglin Road and Cuscaden Road in Orchard. It is located near Orchard Boulevard and Orchard MRT stations.
A handsome gain for City Dev’s 35% share value. Based on the sale price, we believe City Developments (City Dev), who owns c.35% of the share value of Tanglin Shopping Centre would be sitting on a handsome gain based on the selling price as this is one of the ‘legacy’ properties in its books. The book value of Tanglin Shopping Centre is not disclosed, however, our ballpark guesstimate could see gains in the range of S$150m to S$200m (c.S$0.22 per share).
More runway to unlock value via its capital recycling strategy. With the divestment of Millennium Hilton Seoul, City Dev has successfully unlocked and realised c.S$1.2bn (c.S$1.28 per share) of gains from its recent capital recycling strategy. This is close to c.60% of the impairment made at the end of FY2020. As City Dev continues to review and evaluate its portfolio of assets, we believe there is more runway as it embarks on its capital recycling strategy. Aside from the ongoing M&C’s portfolio optimisation plans, City Dev owns a number of strata-units, similar to Tanglin Shopping Centre, such as Katong Shopping Centre, Delfi Orchard, The Arcade, Citilink Warehouse Complex and Cititech Industrial Building.