Perennial set to be sole owner of Capitol after $528m buyout
Perennial Real Estate Holdings is set to walk away as the sole owner of the Capitol Singapore project after a business dispute held up its development.
Perennial will buy out co-owner Pontiac Land Group affiliate Chesham Properties to the tune of roughly $528 million.
Industry watchers said the development, which includes a stalled hotel component, will be better placed to operate after the buyout.
The deal announced yesterday follows a January settlement agreement where either party had the option to purchase all of the other's shares in the property.
Perennial's price tag includes $129.6 million in cash for the shares, funded by internal resources and borrowings. Perennial will also discharge Chesham's shareholder loans of $368.6 million, excluding interest - and pay $3 million to Pontiac-linked Patina Hotels & Resorts.
The price was based on a property valuation of about $1.03 billion. "We believe the assets are fully valued at the agreed price," a spokesman for Chesham said.
DBS analyst Derek Tan said: "It is a good deal in view of the high prices paid for land in recent commercial land transactions. Pontiac probably sees it as an exit from a very good investment."
CGS-CIMB analyst Lock Mun Yee estimated in a note that the Capitol's completed, non-residential gross floor area could be valued at $1,767 per sq ft. Both she and Mr Tan separately argued that this appears to be below replacement cost.
It compares favourably, they said, with what GuocoLand and Guoco Group paid for a Beach Road commercial site and what IOI Properties coughed up for the prime white site in Central Boulevard.
The analysts are also banking on the opening of the luxury hotel at Capitol. Although a mall and the Capitol Theatre opened in 2015, the 157-room hotel has been shuttered. Mr Tan and Ms Lock agreed that the property's retail component appears to be underperforming.
Perennial and Chesham picked up the site in 2010, along with a third party that later left the joint venture. The relationship soured as disagreements began cropping up by 2013.