OCBC Bank has selected United Engineers (UE) for the development of a shopping mall and a hotel at the former Hotel Phoenix and Specialists’ Shopping Centre site at Somerset.
About $550 million is expected to be spent for the development of the project, which is likely to be completed by the second half of 2013, said UE. The whole project will be sold to the bank upon its completion.
This arrangement allows the bank to keep its ownership of the key Orchard Road property following the completion of the redevelopment. Under the policies introduced by the Monetary Authority of Singapore (MAS) in 2000 to divide financial activities of banks from their non-financial activities, Singapore banks cannot develop or manage hotels or other properties, though they are authorised to own properties for investment purposes.
In March, OCBC said that it was negotiating with UE for the redevelopment of the site, which is located between Orchard Central shopping mall and 313@Somerset.
UE will build the site and arrange for its funding, said OCBC in a statement.
A spokesperson for OCBC refused to disclose details of development fees.
The cost “are expected to contribute positively” to future earnings of UE, said the developer in another statement.
Construction of the site is expected to start in July.
UE will finance the project using bank loans and its own cash, and will develop the site through UE Somerset and UE Orchard – its two wholly owned special-purpose vehicles.
UE Orchard, which will get an issued share capital of $500,000, will develop a retail mall, a hotel and a pedestrian bridge that will connect the new development to the previous Orchard Emerald site, which is owned by the insurance unit of the bank – Great Eastern.
UE Somerset, which will receive an issued share capital of $200,000, will be in charge of the construction of an underpass that will connect the former Orchard Emerald site to the new development.
UE Somerset and UE Orchard will be sold to the bank upon the project’s completion. OCBC has approved to purchase shares of both companies and pay off any loans of outstanding shareholders.