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(SINGAPORE) City Developments Ltd (CDL) may have found a new buyer for the mixed bag of properties it failed to sell to Suntec Real Estate Investment Trust last year.

This time, the potential buyer is said to be an entity linked to Australia's Macquarie Bank, with some sources tipping the party as a property fund of Macquarie Global Property Advisors (MGPA). Sources say CDL is locked in an exclusivity period with the Macquarie entity, while the latter does due diligence on the portfolio.

CDL agreed last year to sell up to 99-year leasehold interests in the portfolio of 11 properties for a total of $788 million, with CDL retaining the reversionary freehold or 999-year leasehold interests to eight of the properties.

Market watchers reckon the portfolio could be worth $950 million to $1 billion today, given the substantial pick-up in office values over the past year.

The 11 properties include four entire buildings, mostly offices - Fuji Xerox Towers at Anson Road, Plaza By The Park at Bras Basah Road, City House at Robinson Road, and Central Mall Office Tower at Magazine Road near the Singapore River.

The portfolio also includes strata units in other buildings - The Arcade at Collyer Quay, Katong Shopping Centre, 470 North Bridge Road, Fortune Centre in Middle Road, and Golden Mile Complex along Beach Road. Two car parks - at People's Park Centre in Chinatown and Queensway Shopping Centre - were also part of the portfolio that Suntec Reit was to have bought last year.

Sources suggest the final list of assets Macquarie could buy may change, depending on negotiations.

Industry observers suggest the fund that MGPA could use to buy the CDL portfolio may be the MGP Fund II, for which MGPA raised US$1.3 billion in equity in September last year.

In May this year, MGPA managing director Simon Treacy told Reuters the fund would buy more properties in the next couple of months in Asian cities, including Singapore. 'We don't get excited by shiny buildings. We like an ugly building in a good street,' Mr Treacy said, adding that MGPA aims for annual returns of 20-25 per cent by refurbishing and redeve loping buildings.

Under last year's proposed deal with Suntec Reit, CDL was to sell only the 99-year leasehold interest of the freehold and 999-year leasehold properties in the portfolio - namely, City House, Fuji Xerox Towers, Plaza by the Park, Central Mall Office Tower, The Arcade, Katong Shopping Centre, 470 North Bridge Road, and Queensway Shopping Centre Car Park.

Market watchers suggested then that this was to capture lower prices for the properties and thereby boost the yields on them for the proposed buyer, Suntec Reit.

Another feature incorporated in the transaction to boost yield in the short term - deferred payment of units in Suntec Reit to vendor CDL equivalent to almost 10 per cent of the purchase price - came under scrutiny after a speech by Temasek Holdings chief executive Ho Ching warning investors of some of the potential pitfalls of investing in the Reit market, including deferred payment schemes. Ms Ho did not name any particular Reit. Suntec said in October last year it was calling off the deal, citing delays in obtaining regulatory approvals.

On hindsight, that may not have been such a bad thing for CDL, since the value of the properties has appreciated over the past year with tightening office supply and an improved overall business outlook.