Phoenix Site To Rise Again As Hotel-Retail Complex

Source : The Business Times, January 11, 2008

Straits Trading in talks to redevelop site; new complex to roll out in 2011

A new 580-room hotel and a retail complex with a net lettable area of about 150,800 square feet is slated to come up on the Specialists' Shopping Centre and Hotel Phoenix site in 2011.

OCBC Bank, which owns the land parcel, told BT yesterday that work on the site is likely to start in the second half of 2008 and will take about three years to complete.

The upcoming hotel will occupy about 60 per cent of the complex's gross floor area and the remaining 40 per cent will be taken up by retail shops. The complex will have about 262 parking lots, OCBC said. Right now, the complex has a gross floor area of about 539,000 sq ft.

OCBC was responding to queries from BT after Straits Trading Company said in a filing to the Singapore Exchange that it is in 'advanced negotiations' with the bank to be appointed to develop a hotel and retail complex at the Specialists' Shopping Centre and Hotel Phoenix site.

Under the deal, a wholly owned special-purpose vehicle (SPV) of Straits Trading will fund and build the complex based on a maximum development cost, which will be agreed on between Straits Trading and OCBC.

Once the complex is completed, Straits Trading will then sell the SPV to OCBC and at the same time lease the complex for a period of three years - with an option to renew for a further three years at an agreed fixed annual rent. The terms of the arrangement are currently being discussed and negotiated, Straits Trading said.

Structuring the deal this way minimises development risk for OCBC. 'As a bank, we believe that it is inappropriate for us to assume development risk,' said Koh Ching Ching, head of group corporate communications for OCBC Bank.

OCBC appears to be going ahead with its plans to develop its Specialists' Shopping Centre and Hotel Phoenix complex - rather than working with its insurance subsidiary Great Eastern Holdings, which owns shopping mall Orchard Emerald just across the road.

OCBC and Great Eastern seemed poised to redevelop the Specialists' Shopping Centre and Hotel Phoenix complex together with Orchard Emerald just a few months ago, judging by the two companies' submissions to the Urban Redevelopment Authority (URA).

Data released by URA last October showed that provisional permission for the development of the two properties was given in August 2007.

But yesterday, OCBC said: 'Orchard Emerald is held by the Great Eastern Group and we believe that Great Eastern is at a very preliminary stage with regard to this potential redevelopment.'

Straits Trading, one of Singapore's oldest companies, is now seeing a buyout offer from Tecity Group, an investment firm owned by several members of the family that have stakes in OCBC.

Tecity offered on Sunday to buy all Straits Trading shares it did not already own for $5.70 a share - valuing the company at some $1.86 billion.

OCBC, which has direct and indirect interests totalling 26 per cent of the shares in Straits Trading, said on Monday that it has not decided whether to accept the buyout offer. About 20 per cent of the shares are held by Great Eastern.

Analysts said that OCBC's plan to launch a new hotel in place of the ageing Hotel Phoenix is timely as Singapore will continue to see a shortage of hotel rooms over the next few years due to increasing visitor numbers.

OCBC's shares shed 14 cents to close at $8.10 yesterday, while shares of Straits Trading rose one cent to close at a one-year high of $5.67.