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The CK Tang department store and adjoining Marriott Hotel on the prime Orchard/Scotts Road corner are not for sale.

This is despite interest in buying the properties expressed by a string of suitors, including Real Estate Investment Trusts, according to CK Tang chairman Tang Wee Sung.

There has also been confusion among some of CK Tang’s small shareholders and even analysts who think that the listed retailer owns the entire complex including the hotel, Mr Tang says.

The freehold hotel/retail complex - known as Tang Plaza - is a strata titled property. CK Tang owns its department store space, giving it only about 28 per cent of the total share value in Tang Plaza.

Tang Holdings - a private entity which is majority controlled by Mr Tang’s younger brother Wee Kit - owns the Marriott Hotel, translating to 72 per cent share value in Tang Plaza.

Tang Wee Sung holds a minority interest in Tang Holdings.

A spokesman for Tang Holdings has also confirmed that Tang Plaza is not for sale. ‘We’ll sell our own homes first before we sell this place,’ Mr Tang Wee Sung said in a recent interview with BT.

‘And once and for all, we want to make it clear that CK Tang does not own Marriott Hotel,’ he added.

Mr Tang, however, acknowledges that the site does have redevelopment potential, as widely speculated about - but he adds that redevelopment is currently not an option.

‘It’s not as simple as that. First of all, there’ll be a huge development charge payment involved. And we’ll need to be careful how to do it without jeopardising the business,’ Mr Tang said.

Currently, the Orchard Road department store is the predominant source of income for CK Tang and pulling down the outlet for a redevelopment project will leave a big vacuum in the group’s accounts.

‘There are no plans to redevelop the property right now. It’s a landmark, an icon. I think there are too many glass buildings, personally,’ Mr Tang says.

If, however, in future there is any redevelopment proposal, Tang Holdings will take the lead (as it is Tang Plaza’s majority owner), albeit with CK Tang’s agreement.

‘We’ll not agree to any plans to redevelop that will jeopardise our business,’ Mr Tang said.

In any case, he stressed that CK Tang is a retail, not property, play. So CK Tang will own just the strata retail portion of any possible redevelopment scheme which may come up in the long term, Mr Tang insists. ‘We need the space for the store. We’re becoming quite small compared with the other major players like Takashimaya, Isetan and Robinson.’

Under Master Plan 2003, the freehold site can be redeveloped into a new project with a total maximum gross floor area (GFA) of about 874,000 sq ft, of which at least 60 per cent must be for hotel use and the rest can be for commercial and residential uses, say property consultants. The potential GFA is about 37 per cent more than Tang Plaza’s existing GFA.

Market watchers reckon that based on the site’s redevelopment potential, the total value of the site (inclusive of development charges payable to the state) is easily worth over $1 billion.

Rather than a total redevelopment, which will involve tearing down the existing property and incurring drastic loss of income for CK Tang at least, what’s more likely in the near future is exploring ways to increase the store’s selling area, for instance, by relocating backroom functions.

What could make a redevelopment project more feasible for CK Tang is if it succeeds in expanding its store count significantly to the point where the group’s bottom line could withstand closure of the Orchard Road store for a few years while it is redeveloped.

Source : Business Times - 28 Nov 2006