EL Development buys Singtel’s Hill Street property

EL Development buys Singtel’s Hill Street property

Singtel is selling its Hill Street property to homegrown-property group EL Development. Planning approval has been granted for redevelopment of the site into a hotel.

The price is between S$115 million and S$120 million, which works out to about S$1,830 per square foot per plot ratio, according to Business Times.

The unit land price is inclusive of a differential premium to change the use of the site, as well as a lease-upgrading premium; the total that EL Development will have to pay the state for these two premiums exceeds S$130 million.

Singtel put up the Hill Street property for sale through a tender last November, and appointed CBRE as its adviser for the exercise.

The tender closed the following month and was awarded to EL Development last month.

A back-of-the-envelope calculation shows that EL Development’s breakeven cost would work out to a record S$1.8 million per room – assuming that it sticks to the plan to put up a 172-room hotel, for which the Urban Redevelopment Authority (URA) granted Singtel provisional permission a year ago.

Hotel market watchers said the scheme probably reflects an average room size of around 520 sq ft (or 48 sq m). If EL Development manages to get URA’s approval to build more rooms, say 300 rooms averaging 288 sq ft (or 27 sq m), the breakeven cost would come down to between S$1 million and S$1.1 million per room.

The highest per-room price fetched for a completed Singapore hotel is S$1.534 million, set by Westin Singapore in Asia Square Tower 2 in 2013. That deal amounted to S$468 million.

An industry watcher said: “EL Development is buying forward, with its purchase of the Hill Street site.”

Singapore hotel values are expected to go up in the next few years, due to a scarcity of new completions. Going by JLL’s data, just 2,400 hotel rooms are expected to be completed between this year and 2020, compared with 2,918 rooms last year and 4,545 rooms in 2016.

This will be EL Development’s first hotel project; market watchers expect it to retain the completed development for recurring income.

The Hill Street property comprises two adjoining land plots with a combined land area of 39,738 sq ft. The larger plot, at 25,021 sq ft, has 999-year leasehold tenure; the smaller plot of 14,717 sq ft has 36 years left on its 99-year lease.

The lease-upgrading premium will be for topping up the smaller plot’s lease to 99 years. The Singapore Land Authority is understood to have granted in-principle approval for a lease top-up, subject to payment of the premium.

Singtel is selling only a 99-year leasehold interest to EL Development for the larger plot with a 999 -year leasehold tenure; the telco will have reversionary interest in the land.

Both plots are currently zoned for “utility” use in the Urban Redevelopment Authority’s Master Plan 2014.

The provisional permission that URA granted to Singtel last year for the site is for a development proposal with a 3.5 plot ratio, which translates to a maximum allowable gross floor area of 139,084 sq ft; the approval was for a 172-room hotel and over 2,000 sq ft of retail space.

The Hill Street property comprises three buildings – a black tower block housing Singtel’s Central Exchange and two lower-rise buildings that are used as offices. Upon completion of the sale, Singtel is expected to lease back the asset until the middle of next year.

EL Development was set up in 2007, initially as a fully-owned subsidiary of building contractor Evan Lim & Co, but later spun off as an independent company so that it could build up its brand and reputation as a property developer. To date, the company has developed industrial and residential projects.

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