Perennial Real Estate has secured the right to buy a 20 per cent stake in a building in central London that is on track to be redeveloped into the city's tallest office space at 73 storeys.
The Singapore-listed firm has entered a call option agreement to acquire the stake in Aviva Tower in the financial district, based on a property value of £330 million (S$586 million) or 2.2 per cent above the current market valuation.
Aviva Tower is a 28-storey office tower at 1 Undershaft that received approval from the London planning authorities to be redeveloped into the tallest building in the City of London, at 304.94m.
The redevelopment will also triple the tower's existing gross floor area and net lettable area to 154,100 sq m and 92,975 sq m respectively.
The tower's current market value of £323 million has not factored in any potential redevelopment value.
The call option is structured as a right to acquire a 20 per cent stake in Aroland Holdings, which owns Aviva Tower.
Perennial paid US$4 (S$5.70) to enter into the option, comprising US$1 to each of the existing shareholders of Aroland.
Should Aroland decide to proceed with the redevelopment, Perennial has the right, but not the obligation, to exercise the call option.
Perennial would then manage the redevelopment once Aroland confirms the execution plans. The option expires on July 31, 2019.
Aroland is held by HPRY Holdings, Burlingham International, and two other investors. HPRY is owned by Perennial chairman Kuok Khoon Hong, one of the largest sponsors of Perennial. Burlingham is owned by Wilmar International executive deputy chairman Martua Sitorus and his family.
Under the redevelopment plans, the new tower will host Britain's highest publicly accessible viewing gallery on the top two floors, curated by the Museum of London, with London's highest public restaurant below.
The total development cost is expected to be more than £1 billion.
Perennial chief executive Pua Seck Guan said: "Despite Brexit, the rental and prospects for quality office space in the core financial district remains strong, in view of its unrivalled prime location and excellent transport connectivity, and backed by robust business demand."