Far East Hospitality Trust receives full S$18 million incentive fee from Central Square divestment 

FAR East Hospitality Trust (FEHT) : Q5T 0%received an additional S$18 million from its divestment of Central Square to City Developments Limited (CDL) : C09 0%. 

This is the maximum amount of the conditional incentive fee that CDL said it would potentially pay FEHT – on top of the property’s S$313.2 million purchase consideration. The deal was first announced in December 2021. 

On Monday (Mar 27), FEHT’s manager said that the additional payment brings the total aggregate sum for FEHT’s divestment to S$331.2 million. 

It represents a 67 per cent premium to Central Square’s book value as at end-September 2021, and an 80.7 per cent premium to the purchase price of S$183.3 million in August 2012. 

Minus divestment costs, the stapled group now expects to net a gain of S$130.3 million from the divestment, as opposed to the earlier estimated S$112 million. 

The manager said the divestment of Central Square enabled the stapled group to unlock latent value in the portfolio of hospitality assets, and strengthen its balance sheet.

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The deal also provided greater financial flexibility for the manager to redeploy proceeds and deliver optimal value to FEHT’s stapled securityholders, it added. 

Located at 20 Havelock Road, Central Square is a 99-year leasehold commercial and residential development in the Singapore River precinct.

When it first announced the divestment in late 2021, FEHT said Central Square could potentially be re-developed to a maximum gross floor area of 31,758 square metres (sq m) – a 78 per cent increase from the current gross floor area of 17,858 sq m.

Its height could also be increased to 20 storeys. 

Conditions for the incentive fee of up to S$18 million included CDL obtaining provisional permission from the Urban Redevelopment Authority to rezone the site and increase gross floor area of Central Square, by end-2023.

The provisional permission would allow CDL to redevelop the property with a higher mix of residential use above certain thresholds.

Stapled securities of FEHT ended at S$0.59 on Friday, while shares of CDL were down 0.7 per cent or S$0.05 at S$7.16.