Khazanah JV divests part of Singapore property for RM4.7b

The sale includes the office and retail portion of the Duo property development in Singapore


KHAZANAH Nasional Bhd’s joint-venture (JV) company with Singapore state investor Temasek Holdings Pte Ltd, M+S Pte Ltd, is selling the office and retail portion of its Duo property development in Singapore for RM4.7 billion.

The sale is the latest major divestment undertaken by Khazanah following the sale of its stake in healthcare service provider IHH Healthcare Bhd to Mitsui & Co Ltd for RM8.42 billion at the end of March and the sale of its entire interest in Desaru Investments (Cayman Islands) Ltd to local power producer Malakoff Corp Bhd for RM288 million in early July.

The M+S asset sale came after Khazanah was reported to have hired Morgan Stanley to advise on strategic options for Malaysia Airlines Bhd.

M+S is a 60:40 JV between Khazanah and Temasek. The island republic deal sees M+S divesting its wholly owned subsidiary Ophir-Rochor Commercial Pte Ltd to Allianz Real Estate and private equity firm Gaw Capital Partners, for S$1.575 billion (RM4.74 billion) or S$2,570 per sq ft of net lettable area.

The sale includes Duo Tower, an office block with 20 floors worth of prime Grade-A office space, and Duo Galleria, which has 56,000 sq ft of retail space located right outside the city state’s financial district.

The proposed transaction does not include Andaz Singapore, a five-star luxury hotel by Hyatt which occupies the top 15 floors of Duo Tower, M+S noted in a press release on Monday.

M+S continues to own Andaz Singapore as well as Marina One, a development comprising 1.88 million sq ft of office space with tenants including Facebook Inc, 140,000 sq ft of retail space and luxury apartments.

“With the office and retail assets performing well beyond expectations, we are delighted that the proposed transaction of S$1.575 billion, at a record price for this area, has presented the opportunity to maximise returns for our shareholders,” said M+S CEO Kemmy Tan.

“As we continue to own the hotel Andaz Singapore, we look forward to working alongside the powerful combination of Allianz Real Estate and Gaw Capital Partners, who have impressive global track records in real estate management and development, to further reinforce Duo as an attractive place for global business and travellers.”

The announcement confirmed a report by The Malaysian Reserve (TMR) last year on Prime Minister Tun Dr Mahathir Mohamad’s desire to dispose of some of Khazanah’s properties in Singapore to raise cash to plug the financial hole left by the previous administration.

“That may be one of the ways. We need to get out of some of the businesses…where we see they are unable to manage, they are making losses. But even where they are making money, perhaps the government might want to recoup some of the investment,” Dr Mahathir had told TMR in an interview.

M+S has delivered two joint-development projects in Singapore — Marina One and Duo — which have a total of S$11 billion in gross development value.

The Khazanah-Temasek JV to develop the Marina One and Duo developments came after Kuala Lumpur and Singapore agreed to a land swap deal in 2010.

Under the deal, Malaysia exchanged three plots of land formerly owned by the Malayan Railway and three additional plots in Bukit Timah for four land parcels in Marina South and two parcels in Ophir-Rochor.

Khazanah and Temasek are also undertaking joint developments in Iskandar Malaysia through Pulau Indah Ventures Sdn Bhd, a 50:50 JV between the two investment entities.

The company is involved in the development of Afiniti Medini and Avira integrated wellness projects.