Perennial turns to court amid rift with Pontiac over Capitol Singapore

Disagreement between the co-owners of Capitol Singapore - an integrated development located at the junction of Stamford Road and North Bridge Road - over some key issues relating to the project have resulted in Perennial Real Estate Holdings Ltd (Perennial) seeking court action to wind up three associated companies.

The three associated companies - Capitol Investment Holdings, Capitol Retail Management and Capitol Hotel Management - are equally owned by Perennial (through Perennial Capitol and New Capitol) and Pontiac Land (through Chesham Properties).

These Capitol entities hold the assets of Capitol Singapore, which includes a luxury hotel, mostly high-end retail shops, residential units, and the refurbished landmark Capitol Theatre.

Explaining the move to have the associated firms wound up, Perennial said in an announcement on Thursday that both sides are "in deadlock" and "their relationship has been adversely affected such that the shareholders (of the three Capitol entities) cannot realistically continue to work together constructively".

"As such, it is just and equitable that the Capitol entities be wound up," Perennial added.

All components of the integrated development - retail, theatre, hotel and residences - have received their temporary occupancy permits.

Perennial said: "The Perennial entities and Chesham have been unable to agree on a number of key issues relating to the Capitol project. As a result, in the last few months, the Capitol project has become increasingly deadlocked at both the board and shareholder levels."

When asked what will happen to the day-to-day operations at the development, a Perennial spokesperson said: "The making of a winding-up application will protect and preserve Capitol Singapore's assets until such time as the applications are determined by the court.

"The relevant Capitol entities will also continue to be managed in accordance with the current practice. The retail tenants will be able to continue their business as usual and tenancy agreements entered into by Capitol Singapore with the retail tenants will continue to be observed."

Representing Perennial is TSMP Law Corp's Thio Shen Yi; Pontiac is understood to be represented by Drew & Napier's Davinder Singh.

Perennial (through its entities) is prepared to either (i) buy Chesnam's 50 per cent shareholding in the Capitol project, (ii) sell its effective 50 per cent shareholding to Chesham, or (iii) have all shares in the project sold to a third party.

When asked what course of action it will pursue, a Pontiac Land spokesperson said: "Chesham Properties Pte Ltd regrets that Perennial Real Estate Holdings Limited has chosen to commence proceedings in court. We are reviewing the options and we will respond appropriately in the interests of the company."

Pontiac Land is a privately-held luxury property developer owned by the billionaire Kwee brothers.

Property consultants declined to estimate how much the development would be worth if liquidated, but one analyst said Perennial could make a small profit if it cashes out, as the current market value of the development is slightly greater than its gross development value of S$1.1 billion.

DBS Group Research equity analyst Derek Tan, who has a "buy" rating on Perennial, does not intend to change his rating, given the uncertainty of the outcome.

Asked which seems the most favourable option for Perennial, the analyst said: "I believe it would be for Perennial to sell its stake to either Pontiac or a third party, subject to pricing. This is because Perennial does not enjoy much scale in Singapore, which makes it hard to pit itself against other landlords with scale."

Perennial's focus remains largely in building integrated developments in China. In Singapore, it owns stakes in TripleOne Somerset, Chinatown Point, AXA Tower and CHIJMES.

Mr Tan said: "There has been some delays to the opening of the hotel, and the retail component seems to be still a little quiet. Probably familiarity has yet to really set in with consumers yet. Residential sales have also been slow." Close to half the 39 residential units have been sold.

On Thursday, Perennial shares closed trading at S$0.91, down 1.1 per cent.

This article was first published on April 15, 2016.
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