Nan Fung Group invests in South Beach project

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Published June 10, 2009

Nan Fung Group invests in South Beach project

Entities linked to HK-based group pumping in $205m in refinancing deal

By KALPANA RASHIWALA


HONG KONG developer Nan Fung group has emerged as an investor in Singapore's South Beach project.

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South Beach project: CDL will take a leading role for the project, which is on track to be completed by 2016

It will subscribe to $205 million of five-year secured convertible notes under a refinancing exercise for a $1.2 billion loan on the 3.5-hectare site. The plot was sold for almost $1.69 billion in 2007 during the property bull run to South Beach Consortium - a joint venture company equally owned by subsidiaries of City Developments Ltd (CDL), El-Ad Group and Dubai World.

The $1.2 billion loan that matures later this month will be refinanced by a combination of an $800 million two-year secured bank loan and $400 million of secured convertible notes.

A fully owned unit of CDL will subscribe for $195 million of the notes, with entities associated with the Nan Fung group of companies taking the rest. The notes may be converted into equity in the joint venture company any time during their five-year duration, subject to conditions and terms that have not been disclosed.

If CDL converts its notes, it will emerge as the leader of the consortium. And if Nan Fung follows suit, it will become a shareholder in the consortium.

The $800 million secured term-loan facility announced yesterday has been provided by a syndicate comprising DBS Bank, United Overseas Bank, OCBC Bank, The Hongkong and Shanghai Banking Corporation and Sumitomo Mitsui Banking Corporation (Singapore Branch).

These five banks plus Bank of Tokyo Mitsubishi provided the initial $1.2 billion bridging loan facility.

Market watchers note the smaller quantum of $800 million secured for the latest term loan. In a statement, South Beach Consortium noted the 'ongoing challenging credit environment in the global financial markets'.

In its full-year 2008 results statement released in February, CDL said a recent external valuation of the South Beach project was done and the conclusion is that no provision is required for impairment on the development.

It was in November last year that CDL first announced a deferment of construction of the project until construction costs ease.

The project was originally slated for completion by 2012. Under an agreement signed with the Singapore Government, from whom the consortium bought the 99-year leasehold site, the group has up to 2016 to complete the development. The consortium is now expected to begin construction by late next year.

In a filing with Singapore Exchange last night, CDL said: 'The consortium . . . is currently taking the opportunity to review and refine its plans for the development so as to maximise the immense potential of this sizeable prime site, making it even more efficient, while in the meantime noting that construction cost is expected to come down further.'

The project, designed by London-based Foster + Partners, will comprise two tower blocks and four conserved buildings housing offices, luxury hotels, retail space and residences.

In late 2007, CDL said that the project would cost some $2.5 billion in all, including the land cost.

CDL will take a leading role developing the South Beach project, which is on track to be completed by 2016, yesterday's statement said.

Talk surfaced last year that El-Ad and Dubai World were keen to offload their stakes in the project. However, the two yesterday confirmed their commitment to South Beach.

The consortium's winning bid of $1.69 billion for the plot in the public tender worked out to $1,069 per square foot of potential gross floor area and was reported to be about $500 million lower than the top bid, which was not even short-listed under the two-envelope evaluation system.

The Urban Redevelopment Authority evaluated the various concepts before looking at the price offered for the site.

The South Beach project will be Nan Fung's first major property investment here.

The group, set up by Chen Din-hwa, has a joint venture with Singapore's Metro group developing 1 Financial Street in Beijing. Mr Chen, who is in his 80s, made his early fortune in the textile business before moving into property.

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June 10, 2009 Wednesday

South Beach project gets fresh funds

CDL and partners secure extra $1.2b; completion expected by 2016

By Yang Huiwen

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South Beach, which is designed by London-based architectural firm Foster & Partners, will house premium office space, luxury hotels, city residences and retail space. -- PHOTO: CITY DEVELOPMENTS

THE landmark South Beach project being developed by City Developments (CDL) and Middle Eastern investors has secured a fresh injection of cash from banks and a property developer from Hong Kong.

CDL and its two joint venture partners - Istithmar, part of the Dubai World Group, and Elad Group - have disclosed that they have secured an extra $1.2 billion to develop the Beach Road project. It is opposite the Raffles Hotel.

The deal comprises an $800 million syndicated bank loan and $400 million in secured convertible notes.

About $205 million of the $400 million secured convertible notes will be subscribed by three investors associated with the Nan Fung group of companies, one of the largest privately held conglomerates in Hong Kong. The remaining $195 million will be taken up by a wholly owned subsidiary of CDL.

The two-year $800 million secured term loan is provided by a syndicate comprising DBS Group, United Overseas Bank, OCBC, HSBC and Sumitomo Mitsui Banking Corp.

The capital injection goes some way to allay concerns about the development of the project which must be completed by 2016, under the terms of an agreement signed with the Government.

Last year, construction was delayed by the developers who said they wanted to wait for construction costs to fall to more reasonable levels.

Yesterday, the South Beach project was said to be on track to be completed by 2016, with CDL taking a leading role in the development.

The project, designed by London- based architectural firm Foster & Partners, will house premium office space, luxury hotels, city residences and retail space.

Construction costs are 'expected to come down further, which will be to our advantage', said CDL executive chairman Kwek Leng Beng, adding that securing financing for South Beach showed the confidence of bankers and investors in the development's potential.

'We are pleased to welcome our new investors and look forward to leveraging on their extensive experience in property investment and development in North Asia,' said Mr Kwek.

'These partners and investors have extensive networks and can bring in business connections which will further value-add to the project.'

Ms Vivien Wai Wai Chen, chairman and managing director of Nan Fung Group, said: 'We have been looking for good investment opportunities to grow in the current challenging economic environment.

'The South Beach project presents a unique opportunity to work with renowned international investors who are leaders in their respective areas and provides a prominent platform for us to enter the Singapore market.'

Nan Fung Group's investment in the South Beach project highlights a growing trend of Hong Kong developers becoming more active players in Singapore.

Hong Kong's Sun Hung Kai Properties is jointly developing Ion Orchard with CapitaLand.

Ahead of the announcement yesterday, shares of CDL closed 14 cents, or 1.56 per cent, higher at $9.09. And the stock is up 42.7 per cent since the start of the year, compared with a 33.4 per cent gain in the benchmark Straits Times Index.

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