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MAINBOARD-listed construction company Chip Eng Seng Group will team up with Lehman Brothers Real Estate Partners II to build a high-end residential development in Cairnhill in a 50/50 joint venture.

The site, formerly Venus Mansion, was acquired by Chip Eng Seng earlier this year for $123 million. Raymond Chia, managing director of Chip Eng Seng's property arm, Chip Eng Leong Enterprise - now known as CEL Development - said the development will be worth 'over $200 million' when completed.

The joint venture with Lehman Brothers - through a newly formed company called PH Properties - comes after an earlier venture fell through when they failed to clinch a site near Tanah Merah MRT Station in a public tender in April.

There is no agreement with Lehman Brothers to partner CEL Development 'exclusively' in Singapore.

Even so, more joint ventures are possible. Lehman Brothers (Asia) managing director (private equity) Keith Greengrove said: 'Our experience with CEL so far has been extremely professional in the negotiations and due diligence process, and we look forward to continuing to make investments with them.'

Mr Greengrove pointed out that Lehman Brothers has been investing in Singapore property since 2004 when it bought the Hotel New Otani on River Valley Road - now Novotel Clarke Quay Hotel. It also has a stake in Paradiz Centre in Selegie Road. In March, Lehman Brothers partnered Shimizu Corp in a failed bid for a hotel site at Changi Airport. Mr Greengrove said: 'Lehman Brothers, particularly the real estate group, remains bullish on the Singaporean market.'

The Cairnhill project, which is expected to be launched for sale in Q2 2007, will be its third real estate investment here.

Revealing details on the project, Mr Chia said that they expect to build a 70-unit development with apartments about 2,000 sq ft in size. He added that the break even cost would be about $1,100 psf. He said that the final cost will depend on the type of fittings specified and highlighted that construction materials costs had risen by about 3 per cent over the last year.

Chip Eng Seng, which has large main-contractor jobs like the Housing and Development Board's The Pinnacle @ Duxton, only ventured into property development on its own in 2002 after earlier joint ventures with partners like NTUC Choice Homes. Mr Chia said that property development now makes up two-thirds of its revenue with the remaining one-third coming from construction contracts.

On the latest joint venture, CEL hopes some of its partner's financial finesse will rub off. 'Lehman Brothers can guide us on financing,' he said, by way of explaining how Chip Eng Seng expects to arrange its gearing ratio.

Chip Eng Seng, which requested a trading halt at 3 pm pending the joint venture announcement, was last traded at 18.5 cents.