MALAYSIA'S IOI group is poised to emerge as City Developments Ltd's (CDL) partner in the landmark South Beach project in Singapore, say sources.
IOI is said to be nearing a deal to buy US-based Elad Group's one-third stake in the consortium developing the office, hotel, retail and residential project on the former NCO Club/Beach Road camp grounds opposite Raffles Hotel.
BT understands that IOI could be paying around $170-175 million for Elad's stake, a premium to the $155 million that Dubai World unit Istithmar will receive for selling its one-third stake in the consortium to CDL under a deal revealed last month.
As with that divestment by Dubai World, any sale of Elad's stake to IOI will be subject to regulatory approvals.
CDL teamed up with Istithmar and Elad to buy the 99-year leasehold plot from the state for $1.69 billion in 2007, with the three holding equal stakes in the consortium. CDL's equity stake in the consortium will rise to two-thirds once the group completes the acquisition of Dubai World's stake.
Kwek Leng Beng, executive chairman of CDL, said last month that the group eventually would like to own more than 50 per cent of the project, although he remains open to welcoming new investors.
Hong Kong's Nan Fung group also has an interest in the consortium through its ownership of high-yield secured convertible bonds issued by the consortium. CDL also holds such bonds.
Market watchers will keenly watch how the dynamics between CDL and IOI, helmed by two astute businessmen, play out.
Lee Shin Cheng, executive chairman and CEO of both IOI Corporation Berhad and its real estate arm IOI Properties Berhad, is experienced in the plantation and property development industries. CDL's Mr Kwek is seasoned in the real estate, hotels, finance company and building materials businesses.
The contract for the construction of South Beach's diaphragm wall and piling was awarded last year and actual site work is expected to begin in the first half of this year.
'Evaluation of the main construction contract is in progress and is expected to be finalised around the middle of 2011. The South Beach project is now expected to be completed in 2015,' CDL said in a regulatory filing with the Singapore Exchange on Feb 24.
The project - located between Raffles Hotel and Suntec City, and next to the Esplanade MRT Station - was originally scheduled for completion by 2012 at a total development cost (including land) estimated at $2.5 billion.
However, in November 2008 - during the global financial crisis - CDL announced that construction would be deferred until building costs eased.
Under its agreement with Urban Redevelopment Authority, the consortium has up to nine years, or until around September 2016, to complete the project - that is, obtain Temporary Occupation Permit.
The development is expected to have 171 apartments, 560 hotel rooms, 632,164 sq ft and 158,014 sq ft gross floor area of office and retail space respectively.