IOI Properties scraps tie-up with Hongkong Land for S'pore project

Malaysia's IOI Properties will likely remain solely responsible for a mixed-use project in Singapore after terminating an agreement with Hongkong Land.

The news rattled market watchers, whose fears that it would stretch IOI Properties' net gearing helped send the shares to a two-year low yesterday.

IOI Properties said on Tuesday that it is confident of completing the project.

It told Bursa Malaysia that the termination was due to "non-fulfilment of certain conditions precedent" but did not specify which conditions were not met. Hongkong Land also decline to comment.

Hong Leong Investment Bank analyst Lee Meng Horng said theHongkong Land would have complemented IOI Properties, given its wealth of experience managing prime office assets.

It would also have eased the balance sheet burden of IOI Properties in undertaking the project.

An IOI Properties' unit secured the white site in Central Boulevard for a whopping $2.57 billion or $1,689 per sq ft per plot ratio in late 2016. Hongkong Land was to take up 33 per cent of the project.

"Without the contribution from Hongkong Land, we expect IOI Properties' net gearing to be stretched... with the estimated development cost in the region of $700 to 800 million," Mr Lee said.

The scheme for the 1.1-ha site comprises two office towers of about 1.26 million square feet of leasable space and a small retail podium of about 30,000 square feet.

The site is adjacent to One Raffles Quay and close to Marina Bay Financial Centre - both properties belonging to Cheung Kong, Hongkong Land and Keppel Land.

Analysts were hoping that with Hongkong Land's involvement, direct underground and overhead links could have been built to adjoining buildings, thus enhancing the project's value.

An industry source said the deal termination could be due to differing views on the market.

There were also technical constraints concerning the site, he said, adding: "The marriage of the two parties was surprising in the first place. The (Urban Redevelopment Authority) approval has also taken longer than expected."

Malaysian media reported this week that IOI Properties was believed to have reached long-term financing deals with five banks to the tune of $1.6 billion.

A version of this article appeared in the print edition of The Straits Times on March 15, 2018, with the headline 'IOI Properties scraps tie-up with Hongkong Land for S'pore project'. Subscribe