IOI Properties receives proposal from CEO to jointly develop Shenton House in Singapore

By Luqman Amin

/ The Edge Malaysia |

June 26, 2024 10:24 AM SGT

KUALA LUMPUR (June 25): IOI Properties Group Bhd (KL:IOIPG) has received a proposal from its group chief executive officer cum major shareholder Lee Yeow Seng to participate in the development of Shenton House, a commercial property located in Singapore that his private vehicle has successfully tendered for, for S$538 million (RM1.9 billion).

According to a bourse filing, Yeow Seng has proposed that IOIPG acquire all or part of his private vehicle, Shenton 101 Pte Ltd, which is planning to redevelop Shenton House, works for which are scheduled to start at the end of 2025.

This is to address and mitigate the potential conflict of interest that will arise due to his role in the redevelopment of Shenton House through Shenton 101, in which he is the sole shareholder. The intention of the proposal is to align the interests of IOIPG with that of Shenton 101, which will hold the redeveloped property as investment upon its successful redevelopment.

"Yeow Seng has emphasised to IOIPG that Shenton 101 is ready and able to proceed with the development planning of Shenton House under the terms of the tender and that Shenton 101 is well on the way to put in place funding to enable it to proceed with the redevelopment and that the reason that Yeow Seng is extending the proposal to IOIPG is to help resolve or address the potential conflict of interest situation," IOIPG's filing read.

Yeow Seng and his brother Datuk Lee Yeow Chor are major shareholders of IOIPG through their substantial shareholdings in Vertical Capacity Sdn Bhd, which holds 65.67% in IOIPG.

Shenton 101 was the sole bidder of Shenton House, which is located in Singapore's central business district. Yeow Seng previously said he felt it was more appropriate to bid for Shenton House via his private vehicle due to the size of the subject and the tight timing set by the sales committee on the collective sale.

Shenton House covers 3,377 square metres and is designated for commercial use with a gross plot ratio (GPR) of 11.2. The property has a 44-year land lease, with the potential to be extended to a fresh 99-year lease.

"Further, according to the Singapore’s central business district incentive scheme, Shenton House is eligible for a 25% bonus gross floor area which can be redeveloped into a mixed-use commercial with residential development or a hotel at the GPR of 14. As such, Shenton House is earmarked for redevelopment into a fresh 99-year leasehold commercial development," IOIPG said.

The current additional existing capital commitment — excluding the development cost, which is to be finalised — is S$476 million, which includes land betterment premium, lease top-up premium, and transaction expenses, it said.

According to IOIPG, Yeow Seng has proposed the purchase consideration be determined based on the actual cost of investment incurred by himself and Shenton 101, multiplied by the equity interest in Shenton 101 to be acquired by IOIPG, or an equivalent subscription value for the subscription of new shares in Shenton 101.

"The good faith intention of Yeow Seng is not to make a personal gain arising from the proposal. As such, the consideration is to include the initial cost of investment of equity in Shenton 101 and the cost incurred by Shenton 101 for the acquisition of Shenton House and any upfront costs incurred by Shenton 101 such as consultants’ fees and expenses and tender, application and approval costs as well as cost of finance," IOIPG added.

IOIPG said the proposal is valid for four months, which may be extended by another two months if a written request is received from IOIPG.

At market close on Tuesday, IOI Properties’ shares dropped four sen or 1.75% to RM2.25, bringing the company a valuation of RM12.39 billion.

This article first appeared on The Edge Malaysia.

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