“Yeow Seng proposes IOIPG acquire equity in Shenton 101 based on actual investment costs to resolve potential conflicts. IOIPG shares drop to RM2.25.”
Kuala Lumpur, 26th June 2024, 13.39pm – IOI Properties Group Bhd has received a proposal from its CEO and major shareholder, Lee Yeow Seng, to participate in the development of Shenton House, a commercial property in Singapore that his private company successfully tendered for at S$538 million (RM1.9 billion).
According to a bourse filing, Yeow Seng suggested that IOIPG acquire all or part of his private company, Shenton 101 Pte Ltd, which is planning to redevelop Shenton House. The redevelopment work is set to commence at the end of 2025.
This proposal aims to address and mitigate the potential conflict of interest arising from Yeow Seng’s role in the redevelopment of Shenton House through Shenton 101, where he is the sole shareholder. The goal is to align the interests of IOIPG with those of Shenton 101, which will hold the redeveloped property as an investment upon its completion.
“Yeow Seng has assured IOIPG that Shenton 101 is prepared to move forward with the development planning for Shenton House as per the tender’s terms. Shenton 101 is already securing the necessary funding for the redevelopment. Yeow Seng’s proposal to IOIPG aims to resolve or address the potential conflict of interest,” stated IOIPG in a filing.
Yeow Seng and his brother, Datuk Lee Yeow Chor, are major shareholders of IOIPG through their significant stakes in Vertical Capacity Sdn Bhd, which owns 65.67% of IOIPG.
Shenton 101 was the only bidder for Shenton House, situated in Singapore’s central business district. Yeow Seng had previously mentioned that it was more suitable to bid for Shenton House through his private vehicle due to the project’s scale and the tight timeline set by the sales committee for the collective sale.
Shenton House spans 3,377 square meters and is zoned for commercial use with a gross plot ratio (GPR) of 11.2. The property has a 44-year land lease, which can potentially be extended to a new 99-year lease.
“Moreover, under Singapore’s central business district incentive scheme, Shenton House qualifies for a 25% bonus gross floor area, allowing redevelopment into a mixed-use commercial and residential development or a hotel with a GPR of 14. Consequently, Shenton House is slated for redevelopment into a new 99-year leasehold commercial property,” stated IOIPG.
The current additional capital commitment, excluding the finalised development cost, stands at S$476 million. This amount covers the land betterment premium, lease top-up premium, and transaction expenses.
According to IOIPG, Yeow Seng proposed that the purchase consideration be based on the actual investment costs incurred by him and Shenton 101, multiplied by the equity interest in Shenton 101 that IOIPG would acquire, or an equivalent subscription value for new shares in Shenton 101.
“Yeow Seng’s intention is to avoid personal gain from this proposal. Therefore, the consideration should include the initial equity investment in Shenton 101, the costs incurred by Shenton 101 for acquiring Shenton House, and any upfront expenses such as consultants’ fees, tender costs, application and approval fees, and financing costs,” IOIPG explained.
IOIPG stated that the proposal is valid for four months, with the option to extend by an additional two months upon receiving a written request from IOIPG.
At the close of the market on Tuesday, IOIPG’s shares fell by four sen or 1.75% to RM2.25, giving the company a valuation of RM12.39 billion.
