Chip Eng Seng scraps mixed-use project in Perth, citing rising costs

PROPERTY developer Chip Eng Seng : C29 0% is terminating its sale contracts with purchasers of units in 28 Lyall South Perth, a proposed mixed-use development in Western Australia by the group’s 70 per cent-owned joint venture (JV) subsidiary. 

Based on expressions of interest issued and sale contracts signed, about half of the residential units for the project have been sold since it was launched for sale in August 2020.

Construction of the project has yet to commence.

In a bourse filing on Thursday (Jul 21), the group said it has been unable to engage a builder to construct the project “on terms which are financially viable”, in light of rising construction costs in Western Australia due to supply chain disruptions brought about by the Covid-19 pandemic.

The situation has been further exacerbated by the ongoing Russia-Ukraine conflict while project financial costs have also risen significantly, said the group.

Chip Eng Seng has therefore decided to “allow the purchasers a timely exit” by terminating the sale contracts as the appropriate course of action.

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Termination of the sale contracts involves returning purchasers their deposits in full, together with any bank interest accrued on the deposits.

“In view of the incremental execution and financial risks to complete the project and there being no visibility as to when the rising costs will retreat to more normal rates, the group and its JV partner have concluded that it is no longer feasible to continue with the project notwithstanding that sales of the units have been relatively encouraging,” it added.

The group said it intends to explore “other viable options” for the site together with its JV partner, Sirona Lyall Street.

Chip Eng Seng’s JV subsidiary acquired the site – comprising 2 adjoining properties at 31 Labouchere Road and 24 Lyall Street – back in 2017, with the group’s share of the consideration amounting to some S$7.6 million.

The adjoining properties have a total site area of 2,040 square metres. At the time of the acquisition, it housed 3 residential style buildings which were previously leased for commercial office purposes.

Together with Sirona Lyall Street, the group had planned to redevelop the site for a mixed-used development comprising residential apartments with a commercial podium. 

Shares of Chip Eng Seng were trading unchanged at S$0.645 as at 9.24 am on Thursday, after the announcement was made.