Here’s why developers will lock horns over possible disposal of United Engineers

Its properties are considered a rarity.

The news on OCBC's potential disposal of United Engineers Ltd. (UE) has hit the media once again, piquing the interest of the developers who would willingly take the responsibility of taking over the the building and construction group. But what really makes it an attractive acquisition?

According to a report by DBS Vickers Securities, UE's business is now more streamlined after the disposal of its non core business segments.

"Now that UE is looking more like a property company, we believe it is an attractive acquisition target for property developers and/or property funds that are looking to acquire a sizeable portfolio with substantial recurring income in Singapore," the report said.

DBS noted that UE's crown jewel is its prized commercial portfolio, which sits on mainly freehold land.

"UE’s prized assets are mainly its investment properties which comprise all segments of investment properties - office, retail, service apartments and industrial," DBS said.

Among these investment, there are three that stand out including UE Bizhub City, One North mixed development, and UE Bizhub West on Alexandra Road.

"These assets are located either along the fringes of the Central Business District, or emerging suburban commercial hubs with good infrastructure and a critical mass of workers, implying strong demand for the assets," the report expounded.

The report dubbed it rare, as majority of the properties are built on 999-year leasehold and freehold land.

With this, DBS asserted that yields on these assets could improve to 5% from the current 3.8%.