The Straits Times
Saturday, Dec 29, 2012
SINGAPORE - A landmark on River Valley Road - the AA Centre - is set to change hands.
An offer of $61.8 million has been made for the site, which has been the headquarters of the Automobile Association of Singapore (AAS) since 1967.
But the offer from Starlite Land Development, a subsidiary of listed property giant Far East Organisation, is well below the indicative price that the AAS set in June when it sought expressions of interest.
It was expecting $90 million to $100 million for the building, which sits on a 33,751 sq ft freehold plot in the prime district.
AAS members will decide on Jan 9, at an extraordinary general meeting, whether to accept the offer. The potential sale, however, does not include the residential units that occupy the top seven floors of the 14-storey building.
The owners of the 24 apartments and four penthouses have put them up for sale separately.
Their target price is about $2,000 per sq ft (psf).
The AAS sold these apartments to finance the redevelopment of its headquarters in 1984.
Its latest sale plan, however, was prompted by the need to expand its activities, especially its vehicle breakdown services, AAS chief executive Lee Wai Mun told The Straits Times.
"When we acquired this place in the 1960s, the scale of our operation was not as it is now," he said. "We need to expand to serve our 83,000 members better."
To stay put would require it to spend a sizeable sum on refurbishment, he added. Also, it cannot expand its automotive-related activities as the area is zoned for residential purposes.
A "couple of possible locations" have been identified but Mr Lee said the AAS was not ready to disclose them. He said Starlite's offer was the highest among the five parties that expressed interest.Its price was also above independent valuations commissioned by the AAS, he added.
Based on the 55,574 sq ft area of the first six floors of the AA Centre that the association owns - and which includes 32 serviced apartments - Starlite's offer works out to around $1,100 psf.
But based on the size of the plot, it works out to around $1,830 psf.
The potential deal is the AAS' biggest since it sold its vehicle inspection business in 2000 to Vicom for $23 million.
The Straits Times understands that the AAS, which turned 105 this year, had wanted for several years to sell the building.
But its plans were complicated by the fact that it did not own the entire 14-floor complex.
Earlier this year, it decided to sell the portion that it owns. "We need to move on," said Mr Lee.
AAS member Sia Cheong Yew supports the sale but questioned the offer price.
"The difference between the indicative and offer price is huge," said the 69-year-old retiree. "Property prices have not changed drastically since mid-year."
The decision to sell, however, "is a good move", he added. "AA does not need to be at the centre of town. The question now is how it can find a new place at a low cost."
In 2003, the AAS bought a 20,000 sq ft property at 2, Kung Chong Road for $9.3 million to build up its repair and towing operations.
In the AAS' advertisement seeking would-be buyers, it said the part of the building it owns could be converted into SoHo (small office/home office) units or serviced apartments. Starlite declined to comment on its plans for the site.
