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Pramerica Asia fund said to be buyer, paying about $175 million

THE Ascott Group, which last week announced plans to launch a service residences trust, is said to be close to selling Liang Court Shopping Centre for about $175 million to Pramerica Asia, formerly known as GRA Singapore.

BT understands the acquisition is expected to be made by a follow-on fund to Pramerica’s Asian Retail Mall Fund, which was fully invested by late 2004 after buying four malls for $749 million - Whitesands in Pasir Ris, Tiong Bahru Plaza mall, Century Square in Tampines, and Hougang Mall.

Pramerica’s acquisition price works out to a net yield below 5 per cent. The mall, built on a site with a remaining lease of about 71 years, is currently less than 80 per cent occupied.

Things have never quite been the same for the shopping centre ever since anchor tenant Daimaru shut its 100,000 sq ft store at Liang Court in 2003, say industry observers.

Liang Court Shopping Centre’s current draws include Japanese supermarket Meidi-Ya, Kinokuniya book store and Audio House, a low-price electronics superstore.

‘The buyer is looking at a growth story, through improving yields, getting more tenants, sprucing up the tenant mix and capital improvement works,’ said a market watcher.

One way would be for the new owner to change the orientation of the mall, which currently faces River Valley Road, to overlook the Singapore River instead.

Also, the various improvement works going on in the area, including Clarke Quay mall next door, bode well for Liang Court’s future, say market watchers.

Ascott’s parent, CapitaLand Group, which owns Clarke Quay, has revamped its property and added a string of new attractions, including Crazy Horse Paris and Ministry of Sound.

Ascott has long earmarked Liang Court Shopping Centre as a non-core asset for divestment. It has appointed Jones Lang LaSalle to market the property. JLL conducted an expressions- of-interest exercise for the asset which closed in November, BT understands.

Liang Court Shopping Centre comprises a five-storey retail podium with two basement levels. A mezzanine level above the fifth storey is used for offices. In all, the property has net lettable area of about 255,000 sq ft, most of which (about 240,000 sq ft) is retail space.

Assuming a purchase price of about $175 million, the acquisition cost works out to $686 psf of net lettable area.

The Liang Court complex also includes a 26-storey service residences tower, Somerset Liang Court, which will be one of the 12 properties Ascott is pumping into its Pan-Asian service residences Real Estate Investment Trust announced last week.

The complex, originally developed by tycoon Goh Cheng Liang’s Wuthelam Group, also includes a hotel (formerly known as Hotel New Otani) which Wuthelam sold in 2004 to a Lehman Brothers real estate fund for $82 million.

Lehman has since appointed Accor Group to manage the hotel, which has been renamed Novotel Clarke Quay.

Source : Business Times - 25 Jan 2006

NEXT month, Singapore’s largest offering of new strata-titled office space in at least a decade will be up for sale.

Far East Organization has 121 strata-titled office units or 160,000 sq ft of office space ready for sale at Central, its $500 million 99-year leasehold mixed project on the Singapore River, above Clarke Quay MRT station.

Its chief operating officer of property sales, Mr Chia Boon Kuah, told The Straits Times that it will launch the 600 to 1,500 sq ft office units after Chinese New Year, possibly in mid-February.

‘It must be 10 years or more since any noteworthy strata-titled space was launched,’ said property consultancy CB Richard Ellis’ Mr Moray Armstrong.

Suntec City, which started selling its space in 1995, was the most recent, he said. ‘There hasn’t been a great number of precedents. Springleaf Tower came after Suntec. It was technically strata-titled but it ended up as a leasing project because of market conditions then.’

Now, the outlook for office rents looks good, as they look set to strengthen further this year amid an improving economy, limited supply of office space, and demand from the banking and finance sector, consultants said.

Indeed, Mr Chia lets on that Far East intends to keep two floors or 18,000 sq ft of Central’s 25-storey office tower for service offices. Since 1998, it has operated service offices at Central Square in Havelock Road.

Central’s strata-titled units, which are meant for sale, will cost between $1,300 and $1,500 per sq ft (psf), said Mr Chia. He said Far East is in talks with a few foreign banks. The developer has already achieved an average price of nearly $1,300 psf for the 70 per cent of its 120 individual studio offices at Central that it has sold.

The studio offices range from 646 to 1,216 sq ft and - like the 227 small office, home office (SoHo) units and the strata-titled units - feature 4.5m-high ceilings.

Central, which now has 17 SoHo units left, comprises a 25-storey tower for studio offices or what Far East terms ‘new age offices’, another 25-storey office tower with floor plates of 9,000 to 15,000 sq ft, two shorter SoHo towers and a five-storey retail podium.

Far East tends to differ from most office developers in that it tends to build office space for sale, as opposed to leasing, sources said.

While most companies prefer to lease space, some small to medium-sized operators will want to own their space, they said.

Strata-titled buildings, however, face a possible eroding of their value and rents in the long run, if owners are not interested in issues such as maintenance, said Ms Tang Wei Leng, DTZ Debenham Tie Leung director.

Strata-titled office space can be found in buildings such as the freehold John Hancock Tower, 999-year Peninsula Plaza, 99-year leasehold Shenton House, High Street Centre and UIC Building. Meanwhile, plans to keep four to five floors of Central for Far East’s headquarters remain unchanged, said Mr Chia.

Source : Straits Times - 23 Jan 2006

They also account for 22.5% of all private-home purchases last year, the highest in at least 10 years

Foreign nationals including permanent residents accounted for a solid 44.1 per cent of private-home buyers in the high-end segment last year.

The percentage, which is for homes costing between $1 million and $5 million, is up on a 36 per cent foreign share in 2004 and 29 per cent in 2003, according to a research paper by Savills.

Overall, foreigners accounted for 22.5 per cent of all private-home purchases in both the primary and secondary markets in Singapore last year. This is up on an 18.4 per cent share in 2004 and is the highest figure in at least 10 years.

Looking only at the prime districts of 9, 10 and 11, this figure was as high as 40 per cent.

‘Districts 4, 8, 15 and 16 (HarbourFront, Little India and the East Coast) were also popular and recorded a sizeable amount of foreign buying interest due to several launches (Caribbean at Keppel Bay, The Azure, The Berth By The Cove, City Square Residences, The Sea View),’ says Savills.

Indonesians and Malaysians combined accounted for almost half of all foreign buyers last year. Indonesians had a 26 per cent share, followed by Malaysians with 25 per cent. UK nationals and mainland Chinese tied for third place, with a 10 per cent share each, followed by Indians with 9 per cent.

Savills’ full-year figures reiterate a trend of strong foreign buying of private homes that has emerged over the past 12 months or so. Foreign buying has been leading the recovery in the island’s luxury residential sector, while local buyers in the mass market continue to be cautious because of interest rate hikes and job stability concerns.

This has led to the much-discussed phenomenon of a ‘two-tier market’.

Singapore’s decision to go ahead with two integrated resorts with casinos in April last year also boosted the island’s profile among international investors, leading them to re-visit its property market, say property consultants.

Residential property prices here had been appreciating at a far slower pace than elsewhere in the region, making the Singapore market undervalued.

In terms of per square foot price, Savills says the average transaction price for the 15 most expensive deals in the luxury segment rose 9.2 per cent last year to about $1,700 psf. However, this is still about 13 per cent lower than the 1996 peak of $1,950 psf.

‘With continued positive sentiments over the future economy, we believe that Singapore’s residential prices will continue to rise, even surpassing the 1996 peak - over the next one-and-a-half years,’ it says.

Savills’ research head Wallace Chu reckons there’s still plenty of room for luxury home prices to recover. For one, the country now has a more modernised infrastructure than 10 years ago. ‘Moreover, as Singapore’s image as a global city becomes more acknowledged by foreign investors, proven by strong foreign buyer activities in the residential sector, this ‘international appeal’ will in turn support the luxury residential market’s recovery,’ he says.

On the growing foreign investor interest in the Singapore residential sector, Savills points to the competitiveness of the local market compared with other regional and international markets like Hong Kong, the UK and Australia.

‘Singapore property values are relatively cheap, but more importantly, investors now perceive that the Singapore market has turned the corner and offers excellent capital gains potential,’ Savills says.

‘Liberal investment policies such as the absence of a capital gains tax and currency controls, easy payment and banking financing schemes for foreign investors are some of the major attractions of the Singapore property market to overseas buyers,’ it adds.

Savills expects overall private home prices - as measured by the Urban Redevelopment Authority of Singapore’s price index for private homes - to rise by 5 to 10 per cent this year, following a 3.8 per cent increase in 2005 based on official flash estimates. The luxury residential segment will continue to lead the price recovery, rising a further 20 per cent this year after a 10 per cent rise last year, it says.

Source : Business Times - 23 Jan 2006

Recent retail moves, like topping Somerset tender, signal revived interest in mall sector

AFTER lying low for years, Far East Organization is back in the mall business with a vengeance.

Just a day after topping the tender for the former Glutton’s Square site in Somerset with a $421.1 million bid, it has announced ambitious plans for a glitzy riverside mall above Clarke Quay MRT station.

The firm said yesterday that it has signed a memorandum of understanding with Japan-based shopping centre manager Parco to run the 200,000 sq ft complex.

‘Parco…will add tremendous value in introducing the latest and most refreshing cutting-edge concepts to liven the retail scene in Singapore,’ said Far East chief operating officer for retail and lifestyle concepts Chia Boon Pin.

The mall will be the retail component of Central, Far East’s $500 million mixed development on the Singapore River.

The company also has ambitious plans for the Somerset site and may hire an international architect to work with a local one to produce a stand-out design, said sources.

‘Somerset is a very prime site. We see a lot of potential in it,’ said Mr Chia.

Far East’s recent retail moves suggest it has discarded its strategy of the 1970s and 1980s when it developed strata-titled malls for sale, sources said.

It now sees more return in developing malls for investment, which is not surprising given the high returns.

Knight Frank executive director Danny Yeo said retail investments can give returns of about 7.5 per cent, higher than other sectors.

‘It’s an obvious choice, especially when supply of retail space in the past five years has grown at less than half a per cent per annum,’ he said.

He expects prime retail rents, which are around $20-$40 per sq ft (psf), to grow at least 10 per cent this year as tourist arrivals and consumer expenditure grow.

With so few retail plots left, the Somerset tender was an opportunity to land the last of two trophy sites that have been put up for sale, consultants said.

Far East was the fourth-highest bidder in the Orchard Turn tender. Its Central mall will open late this year, about the time Singapore’s largest mall, VivoCity, opens in HarbourFront.

Mr Chia expects rentals of $6.50 psf to $40 psf, or an average of $12.50 psf.

Far East said its successful youth-oriented concept at Level One at Far East Plaza will be ‘further refined’ for the Central mall.

It will feature a ‘contemporary, hip concept targeted at young globalised urbanites’ - the sort of chic seen in Odaiba, Japan’s famed shopping and nightlife hot spot, the firm said.

A typical shopper at the mall, which will have 600 shops on five levels, will be a 25 year-old female, said Parco (Singapore) director Shuichi Hidaka.

He said they aim to bring in new Japanese retailers in food and beverage and lifestyle goods. There could be a Japanese or local supermarket plus local and international names.

CB Richard Ellis will co- market the mall with Parco.

Central also has 227 Soho (small office, home office) units, 120 studio office units, 121 larger strata-titled office units and 380 parking spaces.

Far East has sold about 95 per cent of the Soho units and 70 per cent of the studio offices.

Source : Straits Times - 20 Jan 2006

Move comes after Centrepoint trails in bid for adjacent site

OCBC Bank yesterday said it will explore possibilities for its Specialists’ Shopping Centre/Hotel Phoenix property, a day after Centrepoint Properties failed to clinch the former Glutton’s Square site next to Specialists’ Centre.

Centrepoint - in which the bank has an indirect interest of under 10 per cent through Fraser & Neave - emerged as only the fourth highest bidder at Wednesday’s tender for the site. Its price of $356.88 million or $920 psf per plot ratio was 15 per cent below the $421.1 million or $1,085 psf ppr offered by top bidder Far East Organization.

Still, OCBC can hope that Centrepoint manages to clinch another plot that will come on the market later this year. It is on the other side of Specialists’ Centre, which is more than 30 years old. The reserve-list site - part of which is currently used as a carpark - will be made available for application by developers in March and could be launched for tender as early as June.

A spokesman for OCBC yesterday reiterated that the bank intends to hold Specialists’ Centre and the Hotel Phoenix complex for long-term investment.

‘The property is in need of refurbishment and it may be appropriate to do so in conjunction with the new developments at the adjacent plots. We will explore possibilities as we find out more about the upcoming developments on these sites,’ she added.

The bank is not required to divest the freehold Specialists’ Centre/Hotel Phoenix under Monetary Authority of Singapore’s directive for Singapore banks to pare their non-bank businesses by July 17 this year, as the net book value of OCBC’s non-banking property holdings is less than 20 per cent of its shareholder funds.

Property sources say OCBC is not keen to redevelop Specialists Centre/Hotel Phoenix because its existing gross floor area of 443,689 sq ft already exceeds the maximum allowed under Master Plan 2003, by over 20 per cent. Hence, it makes more sense for OCBC to spruce up the existing property.

OCBC holds ‘more than 5 per cent but less than 10 per cent’ in F&N, which fully owns Centrepoint, the OCBC spokesman said.

Had Centrepoint clinched the Glutton’s Square site, BT understands that the original plan within the group was that it could develop its new mall on the site in a manner which will be seamlessly integrated with Specialists’ Centre/Hotel Phoenix.

It remains to be seen if Far East will co-operate with OCBC to tie in the new mall on the Glutton’s Square site with a refurbishment of Specialists’ Centre.

An industry observer said it may have an incentive to do so as the successful tenderer of the Glutton’s Square site will be required to build an underground connection below Hotel Phoenix’s surface carpark linking the new development to a knock-out panel entrance to Somerset MRT Station, say market observers.

In order to do that, Far East will need to seek OCBC’s permission. Of course, there could be further avenues for co-operation. ‘OCBC is already one of Far East’s bankers and who knows, it could also provide a loan for the Glutton’s Square project,’ mused a market watcher.

In any case, it may be in Far East’s interest to co-operate with OCBC, as it may not want its new mall to stand next to a tired-looking building if Specialists’ Centre remains in its current form, he added.

Source : Business Times - 20 Jan 2006