Frasers Property gaining full ownership of The Centrepoint rear block not a sure thing

[SINGAPORE] The much-awaited collective sale of the rear block of The Centrepoint in Singapore’s Orchard Road shopping belt was launched recently at a guide price of S$418 million.

Frasers Property, controlled by Thai billionaire Charoen Sirivadhanabhakdi, has been seen as the most natural buyer and top contender for the asset. It comprises 66 apartments and 66 retail strata units on an L-shaped plot, with about 52 years left on its 99-year lease.

The Business Times understands that the mainboard-listed property group owns all the retail strata units and eight apartments, adding up to about 52 per cent of the strata area and about 85 per cent of the share value in the rear block.

In the freehold front block, where The Centrepoint’s remaining 151 retail strata units are located, Frasers Property owns about 96 per cent each of the strata area and the share value.

The group also fully owns 51 Cuppage Road, a 10-storey office building on a site with about 69 years’ balance lease; the building is directly connected to The Centrepoint’s rear block via a link-bridge.

Gaining full ownership of the rear block of The Centrepoint through the collective sale would be a big step in helping Frasers Property to combine its sites for a major redevelopment, tapping incentives such as bonus gross floor area under the Urban Redevelopment Authority’s Strategic Development Incentive (SDI) Scheme.

Frasers Property certainly looks like it is in pole position to clinch The Centrepoint’s rear block through the tender exercise that will close on Feb 26. However, that may not deter other parties from bidding at the tender, especially if they have been eyeing another nearby asset, Cuppage Terrace.

The row of 17 refurbished two-storey conservation shophouses has food and beverage outlets on the ground floor with outdoor refreshment areas, and hotel rooms above.

Cuppage Terrace is on a 29,000 square foot site with about 62 years’ balance lease.

Some market watchers estimate it could fetch around S$200 million to S$250 million if put on the market today.

If the owner of Cuppage Terrace, Raj Kumar’s Royal Holdings Organisation, is agreeable to selling the property, it could whet the appetite of other developers, including from overseas, for the rear block of The Centrepoint.

If such a party gains ownership of the two assets, it may be in a position to tap the SDI Scheme with a redevelopment proposal.

One possibility could be to incorporate the conservation shophouses into a new development comprising a hotel with some retail.

A design envisaging, say, a glass canopy over the shophouses to create an air-conditioned indoor street in the style of Bugis Junction, would have quite a transformative effect on the locale.

Such a project would help with the continued rejuvenation of this stretch of Orchard Road. A stone’s throw away, on the former Faber House site, UOL Group is expected to open the NoMad hotel this year. The 173-room hotel will feature a biophilic waterfall cascading across 15 storeys.

It is not a 100 per cent certainty that Frasers Property will win the enbloc sale tender for The Centrepoint’s rear block.

If the tender is awarded to another party, it may be a dampener for Frasers Property shareholders looking forward to the group enhancing the value of its ageing Orchard Road assets through redevelopment.

Of course, the group can still continue to manage the part of The Centrepoint mall on the front freehold site; it can also continue to own 51 Cuppage Road. But it would not be able to combine its sites for a sizeable rejuvenation project.

It would be in Frasers Property’s interest to avoid such an outcome.

Given that the group already owns a substantial stake in the rear block of The Centrepoint, it would effectively be paying only for the remaining portion of the block if it is awarded the enbloc sale tender.

In short, Frasers Property can afford to outbid just about any competitor to gain full ownership of the rear block.

The question then is: How high a price is it willing to pay, to defend its turf in Orchard Road?