Singapore 'Fort Knox' maximum-security vault said to be up for sale

Singapore

ASIA'S "Fort Knox", a private, maximum-security vault in Singapore, is up for sale.

Le Freeport, a multi-storey repository for fine art, precious gems and even JPMorgan Chase & Co's stash of gold, has been seeking a buyer since as far back as 2017, so far without success, according to people familiar with the matter.

Owner Yves Bouvier, a Swiss art dealer, has been embroiled in a five-year legal brawl with a Russian billionaire and has been selling assets.

Opened in 2010 at a cost of about US$100 million, the vault sits on a large tract of government land with direct access to the runways of Changi Airport.

Formerly known as the Singapore Freeport, the building was heralded as part of the city-state's effort to boost its wealth management industry and become a regional hub for luxury collectibles and bullion trading. For a while, that worked.

Mr Bouvier's dispute with billionaire Dmitry Rybolovlev "brought some unwanted attention to the facility, but overall it remained the focal point of the gold industry in Singapore, both for institutional and for individual clients", said Joshua Rotbart, who runs a Hong Kong-based logistics firm specialising in precious metals and has used the vault to store clients' assets since 2010.

The climate started to change a few years ago when China's clampdown on luxury spending and an economic slowdown in the region curbed demand for high-value items, while an exodus by many banks from their physical commodity business from 2014 reduced the need for bullion storage.

The venture has lost money for about a decade. It reported accumulated losses of US$18.4 million by the end of last year, according to filings to Singapore's Accounting and Corporate Regulatory Authority (Acra).

Le Freeport's chief executive officer Lincoln Ng recently told at least one tenant that the facility is still for sale, but that its owner has not found a buyer, according to one of the sources.

When contacted via a Le Freeport spokesman, Mr Bouvier declined to comment on whether the business was for sale.

He said that the "attacks by Mr Rybolovlev against me in various courts and in the media have had a very negative effect on my business operations worldwide, including on the Freeport in Singapore", adding: "Despite this, over the past decade, our vision for the Freeport in Singapore has been proven to be a great success".

Mr Ng also declined to comment on whether Le Freeport is seeking a buyer.

The operation has cut rental rates to entice new tenants, said two people familiar with the matter. Anchor tenant Christie's International, which took the entire top floor when the building opened, pulled out last year.

A buyer would inherit an outstanding debt to DBS Group Holdings, Singapore's largest bank, which stood at about US$20 million as at last year.

Any sale would mark a further retreat for Mr Bouvier from his earlier plan to build a network of freeports in wealthy hotspots around the world.

He has said that he abandoned plans to build a Freeport in Shanghai because of the negative publicity from his court case.

In late 2017, he sold his storage and moving company Natural Le Coultre to a French rival, including his minority stake in the Geneva Freeport, the world's largest. He remains the majority owner of his Luxembourg Freeport.

Singapore's government provided support to the Freeport, with the National Heritage Board and the National Arts Council among the initial shareholders - although the two entities said that they divested in 2011.

IE Singapore, a government agency now known as Enterprise Singapore, said in 2014 that the facility provided Asia "with its own Fort Knox", a reference to the US Bullion Depository in Kentucky.

Singapore aspired to be a regional gold trading hub after the government waived goods and service tax (GST) on investment-grade bullion in 2012.

JPMorgan, one of the world's largest gold traders, was among the initial customers, keeping precious metals in the vaults since the opening.

UBS Group, Deutsche Bank and Australia & New Zealand Banking Group (ANZ) have also stored gold there, though Deutsche Bank said that it is no longer a customer, and ANZ said that it has suspended its physical precious metals custody service.

Anyone entering Le Freeport has to go through security checks and a body scan before proceeding into a long atrium dominated by a 38 m long sculpture of polished steel by Israeli artist Ron Arad called the Cage without Borders.

The building, designed by Swiss architects Benedicte Montant and Carmelo Stendardo, includes energy-saving features such as vegetation-covered walls to help maintain temperature and humidity levels.

Surrounding the atrium are windowless corridors with rows of identical steel doors that house the private suites of the tenants.

They include Malca-Amit Global, which handles logistics for diamonds and gold, art movers Helu-Trans Group and Stamford Cellars, according to Le Freeport's website.

Tenants can have goods delivered to the site directly from planes without having to pay goods and services tax. A special heavy-duty elevator at the rear of the building can transport gold directly to the basement vaults.

Secrecy over what was stored in the strongrooms has led to concern about the possible use of the facility for illicit purposes.

In 2015, Singapore imposed new obligations to prevent money laundering and terrorism financing on GST-exempt warehouses including those at the Freeport.

But a year later, the Paris-based Financial Action Task Force said that Singapore's authorities "did not demonstrate a comprehensive understanding of what activities were being undertaken" in the building.

Mr Bouvier said that the Singapore operation employs a system "which allows for complete traceability for every item stored".

He added the security and transparency provided by Le Freeport for both clients and authorities has made it the world's largest facility dedicated to the storage of fine art and high value collectibles.

Singapore Customs, which licenses companies storing goods at Le Freeport, said that it imposes stringent requirements on the storage of high-value goods such as precious stones, and conducts regular checks at the companies' warehouses to ensure that they comply with regulations.

But it is the events outside of the building which have put the Freeport into the spotlight.

Mr Rybolovlev, the Russian art collector, accused Mr Bouvier in early 2015 of overcharging him by about US$1 billion for dozens of canvasses by artists including Gustav Klimt and Rene Magritte.

Mr Rybolovlev said that Mr Bouvier violated fiduciary duties as his broker by deliberately inflating what he said the works cost.

Mr Bouvier and his lawyers have argued repeatedly that he was never Mr Rybolovlev's broker, and that the Russian was just a repeat customer willing to pay top prices to secure the artworks.

The battle has been playing out in courts in Monaco, Paris, New York, London, Geneva and Singapore, where Mr Bouvier currently lives, forcing him to hire an international team of lawyers to fight his corner.

Mr Bouvier told Bloomberg in early 2017 that the battle with Mr Rybolovlev had cost him nearly US$1 billion in lost business. BLOOMBERG