CDL to raise stake in South Beach project

City Developments Limited (CDL) is poised to increase its stake in the consortium developing the South Beach project, after it exercised its right of first refusal to acquire one-third stake of Dubai World in the consortium and met conditions for the transaction, said sources.

This means that CDL's stake will increase to two-thirds, from the previous one-third.

In 2007, Dubai World, CDL and Elad Group collaborated to acquire the 99-year leasehold Beach Road site for S$1.69 billion, with each owning an equal stake in the consortium.

According to sources, Elad and Dubai World have been seeking buyers for their stake. Members of the consortium have the right of first refusal to buy out members wishing to exit.

The Business Times said Jones Lang LaSalle (JLL) represented Dubai World in the sale of its stake and when a buyer was found, CDL exercised its first right to buy that stake.

CDL could be paying approximately S$150 million to S$170 million for the one-third stake of Dubai World, said analysts. They took into account the decline in the site’s value since 2007 and coupon payments on at least S$400 million of high-yield secured convertible notes issued by the consortium to CDL and Hong Kong’s Nan Fung group.

The project was initially slated for completion by 2012 at a total development cost of about S$2.5 billion.

However, CDL announced in November 2008 that construction would be postponed until building costs improved.

The consortium has a maximum of nine years to complete the project and receive Temporary Occupation Permit (TOP).

The development will have 560 hotel rooms, 171 apartments and 158,014 sq ft and 632,164 sq ft gross floor area (GFA) of retail and office space respectively.