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Lum Chang will redevelop The Verge in Little India

23 May, 2017

Lum Chang Holdings has signalled its intention to re-enter the Singapore property market in a big way by inking a deal to buy The Verge in Little India.

The mainboard-listed construction and property group said on Wednesday that it has entered into a term sheet and will begin exclusive due diligence and negotiations for the proposed purchase of the property, which is 90 per cent owned by Malaysian conglomerate DRB-Hicom.

No price was disclosed but BT understands it is under S$300 million.

In May this year, the Malaysia-listed DRB-Hicom called off a proposed sale of the property to a vehicle controlled by Keith Tang, a grandson of CK Tang founder Tang Choon Keng. The termination was due to the buyer's inability to fulfil "contractual obligations" on the agreed completion date, DRB-Hicom had said then in a regulatory filing with Bursa Malaysia. The total indicative sale consideration in that deal was to have been S$317 million for 100 per cent equity interest in Singapore-incorporated Corwin Holding, the vehicle which owns The Verge.

Lum Chang's proposed deal will also involve the acquisition of Corwin's entire issued and paid-up share capital.

The Singapore Exchange mainboard-listed company plans to redevelop the property and reposition it as a new mall and serviced residences. The all-in gross development value is likely to be about S$400 million. Located next to Rochor Station on the Downtown Line, The Verge sits on a site with a balance lease term of about 79 years.

Lum Chang's executive director Tony Fong told The Business Times that the group may be teaming up with an equity partner for the acquisition of The Verge, although he declined to name the party.

In Singapore, the group has previously teamed up with LaSalle Investment Management for the development of Twenty Anson (Lum Chang group took a 5 per cent equity stake and did the construction of the office development). The group has also taken minority stakes in two executive condo projects in Singapore led by Frasers Centrepoint - Twin Fountains in Woodlands and Esparina Residences in Buangkok. Both have been completed. In Malaysia, Lum Chang has partnered Standard Chartered Private Equity in two residential projects, one of which has been completed while the other is ongoing.

For the new project on The Verge site, Lum Chang is also in talks to team up with an established mall operator and a serviced residences operator to run the two components of the proposed development, Mr Fong revealed. "We hope to bring them in early - right from design stage. We are looking to tap the Little India heritage location and the tourism attraction of the area. The Rochor Station on Downtown Line 2 is a major boost to the location's connectivity."

In a regulatory filing with Singapore Exchange, Lum Chang said it has on Aug 3 entered into a term sheet with Hicom Megah (an indirect wholly owned subsidiary of DRB-Hicom), Singapore retailer Mohamed Mustafa & Samsuddin Co and BI Distributors.

Hicom Megah owns about 90 per cent interest in Corwin (the owner of The Verge), with the other two owning about 5 per cent each, according to earlier reports. BI Distributors is owned by Mustafa boss Mustaq Ahmad and his wife.

In its announcement, Lum Chang said: "Upon signing of the term sheet, the company will commence due diligence and...negotiations with the vendors with a view to agreeing the terms of the definitive agreements for the proposed acquisition within the exclusivity period of four weeks or such other date to be mutually agreed in writing between the vendors and the company."

Mr Fong said that if all goes according to plan, the acquisition will be completed in November this year.

"Once we have finalised the concept, designs and obtained the necessary approvals, redevelopment will start sometime next year. Construction is expected to take about two years."

Lum Chang, which is controlled by brothers Raymond and David Lum, has been involved in the construction business in Singapore. It built the Bukit Panjang MRT Station on the Downtown Line Stage 2; the scope of the S$504.5 million project included building the underground station with two basement levels and a 1.8km cut-and-cover tunnel. Incidentally, Lum Chang was also the main contractor for the construction of The Verge. The group used to be active on the Singapore property development and investment scene about two decades ago - it developed Emerald Garden condo in Club Street (completed in 1999) and bought Paragon and Promenade malls in 1996 jointly with Singapore Press Holdings (though Lum Chang later exited that joint venture in 2001). It also constructed the first phase of Crowne Plaza Changi Airport, which was owned by its then sister company LC Development and LaSalle Investment Management.

The group has also been involved in the Malaysian property market for some time and a few years ago decided to expand to the UK. It owns The Pembridge Palace, a 120-room freehold hotel near Hyde Park. It has leased the asset to a tenant, which operates the hotel.

It also owns a Grade A office block at 130 Wood Street near St Paul's Cathedral in Central London. Lum Chang owns a 70 per cent stake with the Lum brothers holding the remaining 30 per cent of this asset. A year ago, the group acquired a 1.03-hectare site near the iconic Wembley Stadium that currently has a warehouse on site that is tenanted. Planning permission has been obtained to redevelop the site into a 600-room student accommodation and 300-room serviced residences. Lum Chang owns 70 per cent of the asset, with homegrown property group Sin Heng Chan owning the rest.

The group has been focusing on expanding its overseas property development/investment activities for the past few years. "But we have now decided to revisit the Singapore market. Property values are more appealing now, after the cooling measures. While The Verge will be a big commitment, we will make our acquisitions selectively and opportunistically - only if the entry price makes business sense," said Mr Fong.

Adapted from: The Business Times, 4 August 2016