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Chip Eng Seng exits from stalled Tower Melbourne project with A$55m sale

CHIP Eng Seng Corporation is exiting from an Australian redevelopment project named Tower Melbourne, now that it has found a buyer who is willing to pay A$55 million (S$56.6 million) for the site.

The group said on Thursday that it has entered into an agreement with the purchaser, who is not related to the company or its controlling shareholders.

This property acquired by the group in September 2011 was originally a commercial building. The group had plans to redevelop it into a 71-storey tower comprising 581 freehold residential units.

But protracted legal proceedings with the owner of the adjoining property who raised objections to the demolition works stalled the progress of the demolition.

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Subsequently, Chip Eng Seng had to cancel some 556 sales contracts with buyers of the residential units and return the full deposit of 10 per cent of purchase price with interest.

Chip Eng Seng said that it considers the sale of the property to be its most viable option at this point in time.

"The opportunity to sell the property presents the company with a clean exit from the Tower Melbourne project given that it is no longer feasible for the company to move forward with the project," it added.

"Continuing to hold the property while the legal proceedings remain unresolved would also mean that that the company will continue to incur additional expenses in ensuring that the site is secure."

Also, the sale will allow the group to unlock some value from the property and use the net proceeds to fund its operations and new acquisitions that may arise in the future, the group said.

Chip Eng Seng also noted that the adjoining property owner is concurrently selling its adjoining property as part of the same sale process. This may present an avenue for the group and the owner to work towards an expedient out-of-court settlement.