FCOT – Lim and Tan

• FCOT has abandoned plan to redevelop Keypoint and instead sell it to a JV between Fragrance and Aspial.

• The property has remaining tenure of 62 years, and the site presently zoned for commercial use, and can potentially yield GFA of 426,421 sf. FCOT had on Aug 15th ’11 obtained approval for a residential cum-commercial development, with maximum gross plot ratio of 5x, or GFA of 391,208 sf.

• The deal between FCOT and Fragrance / Aspial is subject to various conditions, including Singapore Land Authority‘s extending the previous inprinciple approval, or extending terms of lease to a fresh 99 year lease.

• The price is $360 mln before expenses, which works out to $1161 psf, based on current NLA of 309,963 sf. FCOT will realize profit of $72.8 mln from the disposal.

• We would not count on FCOT making a special distribution to its unit holders, as FCOT said it would want to reduce debt, which amounted to $740.3 mln giving a gross gearing of 35.8% at end Mar ’12.

• Note that FCOT’s market price had initially reacted positively to news (in mid August) of the redevelopment plans. Price then was about 80 cents.

• As for Fragrance, which is in the midst of a group restructuring, we would hardly be surprised if management should decide to spend on sprucing up the property and sell it while the demand for office space is strong, as is the case today – witness Oxley‘s namesake development at Robinson Road, or EON Shenton.

• Besides, Hong Fok‘s 360-unit Concourse Skyline in the vicinity still has 130 units unsold (ie 64% takeup), despite getting close to completion next year. It was launched in Sept ’08 at $1600-2000 psf.

• We do not cover the 3 companies.