SINGAPORE - A research report by OCBC Investment Research last week highlighted the untapped redevelopment potential in the western part Orchard Road, which spans from Far East Shopping Centre to Tanglin Mall.
With a lack of upcoming retail developments in the Orchard area over the next two years, OCBC believes there could be a greater impetus for strategic redevelopments along this stretch, which has so far been a neglected area with relatively dated assets.
Which are the property companies that stand to benefit the most if their properties in West Orchard are developed? We look at four singled out by OCBC:
1. Hotel Properties Limited (HPL)
The crown jewel in HPL's portfolio is a large adjoining land site of 212,000 sq ft comprising Forum the Shopping Mall, Hilton Singapore, Four Seasons Hotel and HPL House, all with 999-year leasehold or freehold tenures.
The combined site has 180 meters of valuable Orchard Road frontage - one of longest in the Orchard district. HPL has been long reported in the media to be considering a mega-development combining these developments.
The company recently received a general offer made by a consortium comprising strategic partners Ong Beng Seng and Wheelock Properties. From OCBC's calculations, assuming relevant approvals from authorities, a potential mega-development of HPL's assets in West Orchard could yield as much as a whopping $1.25 billion in surplus net present value.
2. Wheelock Properties
Wheelock gains considerable recurring income from its two prime assets on the edge of west Orchard: Wheelock Place and Scotts Square.
OCBC also views the group's recent participation with Ong Beng Seng in an offer for HPL shares as another strong positive. The move has allowed Wheelock to accumulate undervalued HPL shares and will precipitate further upside should HPL decide to undertake a value-accretive redevelopment combining its large freehold/999-year sites in the west Orchard area.
OCBC also sees Wheelock as one of the most likely property developer candidates for privatisation. The group is 75.8 per cent owned by Hong Kong listed parent Wheelock and Company, which has about $4.8 billion of cash on its balance sheet with a low gearing of 30 per cent. Wheelock's low valuation, cash-rich balance sheet and attractive prime assets makes the company an attractive option for privatisation.
3. Bonvests Holdings
Bonvests' key asset is Liat Towers, which has 42,000 sq ft of site area, 207,000 sq ft of gross floor area and a freehold lease.
The group, which was founded in 1982 and has 30 years of experience, has three core businesses: property rental, hotel ownership and management, and waste management and contract leasing.
In Singapore, Bonvests owns Sheraton Towers Singapore Hotel. Bonvests also has four hotels and resorts located in Mauritius, Tunis, Zanzibar and Maldives under the brand name of "The Residence".
In FY2013, Bonvests completed the renovation works for Sheraton Towers, which contributed to an improvement of its business. In addition, it obtained approval to construct a second hotel in Maldives. Going forward, Bonvests is seeking to construct a hotel in Bintan. The tender for the construction is currently under evaluation.
4. Hong Fok
Hong Fok's main asset in the western Orchard area is International Building, a 52,000 sq ft site. The company is redeveloping the property's existing car park block into a 609-room hotel: YOTEL Singapore Orchard Road.
To be completed by 2018 or 2019, this hotel will be the first YOTEL franchise in Asia and will be managed by the YOTEL group.
Hong Fok has redeveloped its Concourse property in Beach Road into a residential and retail asset, Concourse Skyline. Concourse Skyline was completed this year, and two-thirds of the property has been sold with an average selling price of $1,600 per sq ft.