CDL Buying Singapore’s Delfi Orchard for $326M on Way to Redevelopment Project

Singapore’s City Developments Ltd is on its way to adding one more redevelopment project to a rapidly transforming Orchard Road after winning a tender for a commercial building along the city-state’s famed shopping street.

The developer known as CDL was awarded the rights to Delfi Orchard, a strata-titled, 11-storey commercial building near the intersection with Claymore Road after bidding S$439 million ($325.6 million) for the 1985-vintage building in a collective sale, according to an announcement by the company on Tuesday. The transaction ranks as Singapore’s third-largest transaction of 2024 to date following the S$550 million sale of the Seletar Mall and the S$348 million VisionCrest Commercial (now VisionCrest Orchard) acquisition.

With CDL Hospitality Trusts, an SGX-listed REIT sponsored by the developer, owning the 656-key Orchard Hotel Singapore just behind Delfi Orchard, the deal sets CDL up to combine the two sites into a much larger development, according to sources familiar with the transaction, as the government pushes for rejuvenation of the shopping hub.

“With several redevelopments anchoring the planned transformation for this part of the Orchard Road precinct, this is an exciting opportunity for us to participate in the rejuvenation efforts,” Sherman Kwek, group chief executive of CDL said in a statement.

Shopping Strip Street Frontage

With Delfi Orchard occupying a site with around 80 metres of street frontage along Orchard Road – frontage which the Orchard Hotel Singapore lacks – CDL hinted in the statement that an amalgamation of the sites could be in the works.

“There is the potential to tap on the Urban Redevelopment Authority’s Strategic Development Incentive Scheme, which CDL may explore in the near future,” the company said in its statement.

The URA’s incentive scheme, typically abbreviated as the SDI, allows developers which aggregate two or more commercial properties into a new project, to expand the plot ratio by as much as 20 percent, if they incorporate residential space into their design.

Delfi Orchard occupies an approximately 20,264 square foot (1,883 square metre) freehold site and is zoned for commercial development of up to 20-storeys in height, according to Savills, which advised on the transaction. Law firm Rajah & Tann acted for the vendors in the collective sale.

Big Plans

CDL already owned the majority of the space in the building prior to the collective sale, with the developer controlled by billionaire Kwek Leng Beng paying the equivalent of S$3,346 per square foot of built area for the property, with an eye to the redevelopment potential.

“We are delighted to be awarded the collective sale tender for this strategically important asset which enjoys a prominent frontage along Orchard Road,” CDL’s Sherman Kwek said. “Having owned 84 percent of the units already, this acquisition allows CDL to potentially unlock the full potential of this prime freehold asset.”

The collective sale for the project had been launched just over one month ago.

Should CDL gain direct control of the Orchard Hotel Singapore, which including its Claymore Connect shopping element occupies a 92,440 square foot site, it would be able to amalgamate a 112,704 square foot site and potentially qualify for bonus floor area under the SDI programme.

The hotel and Claymore Connect, combined with Delfi Orchard, currently spans 668,745 square feet of floor area, with the hospitality property on a 75-year leasehold site dating from July 2006.

Orchard in Bloom

The government has incentivised builders to redevelop aging properties along Orchard Road, including issuing a master plan in 2020 to upgrade the area into a “green Oasis in the city.”

Investors have been leveraging the rejuvenation plan, and related incentives, to redevelop aging buildings in the Orchard area.

Located at the corner of Orchard Road and Claymore Road, Delfi Orchard stands diagonally opposite Hotel Properties Ltd’s Forum Mall, which was approved for redevelopment in August as part of a three-building scheme, and across the road from the Ming Arcade, which local investor Royal Group acquired through a $127 million collective sale in December 2022.

For Savills, the commercial transaction is related to developers encouraged by plans for Orchard Road drawn up by the Urban Redevelopment Authority (URA).

“The sale of Delfi Orchard is the third major collective sale in the Orchard Road corridor brokered by Savills, following the earlier successful collective sales of Tanglin Shopping Centre ($868 million) and Ming Arcade ($172 million),” said Jeremy Lake, managing director for investment sales and capital markets at Savills in Singapore. “Developers continue to be drawn to prime development opportunities here and are very excited by the URA’s plans to rejuvenate and refresh Orchard Road.”