IOI Properties not buying Shenton House from CEO but will manage its redevelopment

KUALA LUMPUR (Aug 28): IOI Properties Group Bhd (KL:IOIPG) has declined the offer to purchase Singapore commercial property Shenton House from its chief executive officer and major shareholder Lee Yeow Seng.

However, subsidiaries of IOI Properties have been appointed to be the sole project manager and property manager for the redevelopment of the commercial property.

Shenton House was acquired by Lee’s private vehicle Shenton 101 Pte Ltd in a tender for S$538 million (RM1.9 billion). It was the sole bidder.

Lee, whose family controls a 65.67% stake in IOI Properties, proposed to dispose of Shenton 101 to the listed entity in June.

The plan was for Shenton 101 and IOI Properties to jointly develop the redevelopment project.

By selling Shenton 101 to IOI Properties, Lee was hoping to “help resolve or address the potential conflict of interest situation” that will arise, IOI Properties said when first announcing the proposal.

Shenton House is located in Singapore’s Central Business District with 204 strata units on site. Redevelopment is expected to occur from the first quarter of 2027 (1Q2027) to 1Q2031.

The decision to decline Lee’s offer was considering an already significant exposure to the Singapore property market, as well as existing capital commitments following other recent acquisitions, IOI Properties said in its filing on Wednesday.

“In light of the board’s decision not to accept the proposal, the board (save for Lee, and director Datuk Lee Yeow Chor) has agreed for members of the group and Shenton 101 to enter into the management agreements in order to address and mitigate the potential conflict of interest,” it added.

Terms in the agreements include IOI Properties’ right of first refusal if Shenton 101 or Lee were to reduce stake in the property. IOI Properties will conduct a shareholders’ meeting to consent to the conflict of interest position, it said.

In the past one year, IOI Properties has conducted several acquisitions totalling RM1.205 billion.

They include the Tropicana Gardens Mall in Petaling Jaya for RM680 million, the W Kuala Lumpur Hotel (RM270 million), and Courtyard by Marriott Penang (RM165 million) — all from Tropicana Corp Bhd (KL:TROP).

IOI Properties also acquired two land parcels measuring 9.86 acres in Pantai Kok, Langkawi (RM90.1 million), from the family of Tropicana Corp founder and executive vice chairman Tan Sri Tan Chee Sing.

IOI Properties said the acquisitions, if funded via borrowings, would lift its net gearing to 0.74 times (based on FY2023 balance sheet). The now-defunct Shenton 101 acquisition proposal would have further lift the ratio to 0.89 times, it said.

Shares of IOI Properties settled two sen or 1.01% lower at RM1.96, giving it a market capitalisation of RM10.79 billion. The counter is up 12% this year.