Holland Village is likely to get a new medical centre, along with shops and food and beverage outlets in the same new mall.
The move by Raffles Medical Group is in line with plans by the Government to inject further vibrancy into Holland Village.
Raffles Medical announced that it is buying a property, 100 Taman Warna, from DBS Bank for $54.8 million. A POSB branch used to be on the site but the building is currently vacant.
Raffles Medical will redevelop the property into a mall that will include space for the bank.
The property is on a 99-year leasehold with 72 years left.
The planned mall will have five above-ground levels, one basement level and two levels of basement car parks.
With a gross plot ratio of 3, the planned building will have a floor area of 62,720 sq ft.
Raffles Medical will keep only 9,000 sq ft of the space for medical purposes. It will lease out 4,500 sq ft of the space to DBS for its banking operations. The rest will be available for retail shops and food and beverage outlets.
Raffles Medical estimates that the cost of the redevelopment, including construction costs, development premium and taxes, will be $65 million.
Stock market analysts note that although the new mall includes medical facilities, the development is mainly outside Raffles Medical's core business of providing health-care services.
In a research note, Maybank Kim Eng said "the rationale is sound from an earnings perspective", as owning the entire building will give Raffles Medical security over its long-term plans.
It would be free to expand the usage of the building according to its own needs.
Maybank Kim Eng noted that the $120 million total estimated cost will mean a break-even cost of $1,913 per sq ft, adding that the acquisition price "is fair".
Mr Donald Han, managing director of property consultancy Chesterton Singapore, said the project may be a result of Raffles Medical's failure to convert another property in Orchard, Thong Sia Building, into a medical centre.
It failed to get the necessary approvals from the authorities to build the medical centre and eventually sold the building.
"The problem with Thong Sia was that it was a strata title building with residential and commercial units, but at Holland Village, there is a good chance of getting conversion," Mr Han said.
A Raffles Medical spokesman told The Straits Times that the firm has "obtained preliminary approval from the authorities for the redevelopment".
Suntec Real Estate Consultants head of research and consultancy, Mr Colin Tan, said the property is well located near an MRT station, which will help attract visitors.
Retiree and Holland Village resident Lee Poi Wah, 74, thinks there are enough retail outlets in the area. "But having more medical clinics is good," she said.
Raffles Medical shares fell five cents to $3.04 yesterday.