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SLA to release more sites this quarter to further ease office space crunch.

Offices in state-owned properties seem to be catching on. After a quick turnaround time of about six months and about $2 million spent, Phillip Securities has opened its new Phillip Investor Hub at the former Moulmein Community Centre this week.

And following the healthy take-up of state-owned properties - 12 out of 15 properties put up for dedicated office use were awarded in 2007 - the Singapore Land Authority says it expects to release another 32,300 square feet of space for potential office use in the current quarter. Properties that have been earmarked include the former Siglap-Changi Community Centre.

SLA says that of the 12 properties , which have a total of over 1.1 million sq ft of floor area, half have achieved full occupancy.

Foster Wheeler, a US engineering and construction services consultancy, is another company that will move to the former ITE Pasir Panjang site, taking up 70,000 sq ft. SLA believes the company’s move will free up 50,000 sq ft in the central business district or CBD.

SLA director of land operations Simon Ong said: ‘More importantly, the relief supply met the immediate need of tenants decanting from prime locations.’

The new Phillip Investor Hub was leased to Phillip Securities after it emerged as the top bidder in a public tender with a bid of $35,000 a month for the 22,593 sq ft gross floor area (GFA) building, or just $1.55 psf per month.

Phillip Securities will still maintain its corporate offices in the CBD, but it is quite happy to expand part of its operations to SLA properties . Phillip Securities business development director for consumer services Lisa Lee said: ‘Since we have spent close to $2 million to renovate the place, we intend to lease the state property from SLA for as long as we can.’

While the new Phillip Investor Hub will occupy 100 per cent of its leased premises, ERC Holdings, which was awarded the former River Valley Primary School property , plans to sub-let part of the property to other companies to cover some of its costs.

ERC chief executive Andy Ong said that it would have spent between $3.5 million and $5 million when the refurbishment is completed.

Already, it has signed tenants including luxury watch maker Audemars Piguet, which will set up a service centre, and restaurant group Senso Holdings.

While occupying old buildings does come with certain challenges - power supply and plumbing being the main issues - ERC has nevertheless decided to move a substantial part of its offices out. Mr Ong said that ERC would give up three-quarters of its 20,000 sq ft office in Robinson Road ‘after the rent was increased by 350 per cent’.

Knight Frank director of business space Agnes Tay said that push factors notwithstanding, these state properties may not be for everyone. ‘Most of these tenants are very clear about what sort of location they want,’ she added.

Knight Frank is the leasing agent for the former ITE Pasir Panjang site, which has a GFA of 218,891 sq ft, at Alexandra Road. The site was awarded to master tenant RichZone Properties for $288,999 a month or $1.30 psf per month.

Ms Tay said that leasing operations began in Q4 last year. About 40 per cent of the property has been leased out so far. Apart from Foster Wheeler, other tenants include electronics giant LG.

Early-bird tenants were also offered rents at about $4 psf per month but potential interest has bolstered rents and Ms Tay said that the asking rent has now gone up to $5-5.50 psf per month.

But because of the capital investment involved in undertaking such a large site, Ms Tay notes that there is little ‘immediate profit’ for the master tenant. ‘This is not a yield-type play,’ she said.

Hean Nerng Investments, which is in the business of managing properties , has leased the former Gan Eng Seng School at Raeburn Park - with a GFA of 160,000 sq ft - for about $200,000 per month or $1.25 psf per month. It is sub-letting the property at about $5 psf per month and sub-tenants include a government agency.

The property is already 60 per cent leased. Refurbishment of the property will be completed by end-February and Hean Nerng expects to have no problem filling it up. Hean Nerng managing director Kelvin Lim noted that his potential tenants are either escaping high CBD rents or looking for space to expand.

And CBD rents are expected to continue rising this year. Ms Tay said that asking rents for some prime Raffles Place office space is now as high as $19-20 psf per month, ensuring that at least a few more old state buildings are likely to get a new lease of life.

Source : Business Times - 31 Jan 2008

MACQUARIE MEAG Prime Real Estate Investment Trust (MMP Reit) has reported a 15.7 per cent year-on-year rise in distributable income to $16.2 million for the fourth quarter ended Dec 31, 2007. The Q4 distribution brought 2007 full year’s distributable income to $59 million, up 7.5 per cent.

Distribution per unit (DPU) for the quarter rose 14.3 per cent to 1.68 cents, bringing full-year DPU to 6.19 cents, a rise of 6.9 per cent. ‘This is a result of our regional diversification strategy and focused asset management efforts,’ said Franklin Heng, CEO of MMP Reit’s manager Macquarie Pacific Star.

On an annualised basis, the latest distribution represents a yield of 6.06 per cent based on MMP Reit’s traded unit price of $1.10 on Dec 31, 2007. An increase in the valuations of MMP Reit’s portfolio of 10 properties raised group net asset value (NAV) per unit to $1.61 as at Dec 31, 2007, up 38.8 per cent from end-2006’s $1.16.

Gross revenue for Q4 2007 was $29.8 million, up 32.1 per cent year-on-year. This was due to higher rental rates from renewals, new leases and revenue from new acquisitions. Full-year gross revenue rose 14.6 per cent to $103 million. Net property income for Q4 rose 29.1 per cent to $22.1 million, despite higher year-on-year expenses. This brought full year’s net property income to $76.8 million, up 10.9 per cent. Mr Heng said: ‘As at Dec 31, 2007, our Singapore properties enjoyed full occupancy for retail space and 99 per cent occupancy for office space. The 79,100 square feet of office leases which expired in 2007 had average quarterly passing rents of $4.90 to $5.30 per square foot per month (psfpm) and these were renewed or contracted at average rents of $7.70 to $12.10 psfpm.’

Related links: Click here for MMP Reit’s media release Financial statements Presentation slides

MMP Reit’s portfolio includes a 74.23 per cent strata title interest in Wisma Atria and a 27.23 per cent strata title interest in Ngee Ann City. In 2007, it acquired seven prime properties in Tokyo and a retail property in Chengdu in China, growing its asset portfolio to $2.2 billion.

The Reit said it continues to exercise prudent capital management by maintaining a low gearing and strong balance sheet. ‘Our gearing of 29 per cent is at a healthy level. To shield MMP Reit from interest rate volatility, 89 per cent of our debt is fixed and the average interest rate is 2.69 per cent. Interest cover is 4.4 times. The recent establishment of a $2 billion multi-currency medium term note (MTN) programme will provide additional sources of funding,’ said Mr Heng.

On MMP Reit’s outlook, Stephen Girdis, chairman of Macquarie Pacific Star, said: ‘MMP Reit has in the past year laid the foundations for strong organic growth for the next couple of years, through its maiden acquisitions in Japan and China, and its tenancy remix and asset enhancement initiatives for MMP Reits’s Singapore properties , Wisma Atria and Ngee Ann City.’

Source : Business Times - 31 Jan 2008

LESS than a month ago, hardly anyone paid attention to The Straits Trading Company (STC), a stock traded so thinly that despite being a billion-dollar company involved in the hot mining sector, no analysts covered it.

Now that blood is in the water, so to speak, the sharks are circling. Speculation or otherwise has driven STC’s share price up to $6.75 as at yesterday’s close, even though the latest counter-offer, made on Monday by the Tan Chin Tuan family-linked Tecity Group, was $6.50 a share.

So what exactly are these people buying?

STC has four core segments: tin mining and smelting, hotels, property , and financial investments. Let’s take it one segment at a time.

The tin business is run through the KL-listed Malaysia Smelting Corp (MSC), of which STC owns 73 per cent, according to its 2006 annual report.

MSC produced about a fifth of the world’s tin output in 2005, or more than 58,000 tonnes, from mining and smelting operations in Malaysia and on the Indonesian island of Bangka. Bangka is one of the world’s largest tin mining areas. But in recent years the Indonesian police have clamped down on illegal mining there, disrupting business.

Of MSC’s two subsidiaries there, 75 per cent-owned PT Koba Tin has been dogged by investigations, causing MSC’s output to fall by a quarter in 2006.

The problems continue. Last June, three executive directors were accused of getting ore from small-scale miners operating outside a licensed area. They were fully acquitted. However, the issue surfaced again on Tuesday, when Koba Tin was ordered to stop smelting to facilitate investigations because its suppliers were alleged to have mined in a forest area.

Hotel arm

STC’s hotel arm is run through Rendezvous Hotels & Resorts International, which operates 14 four or five-star hotels and has a further five under construction. The bulk are in Australia and New Zealand, with one each in Singapore, Malaysia and the UAE, and three in China.

The group also owns commercial and residential properties , the latter mainly freehold land, for rental and sale. A handful are in Singapore while the bulk are in Malaysia. The segment also includes Straits Media, a billboard advertising unit.

In its report, STC said it planned to have minimal equity in development, focusing instead on growing fee-based property and hotel management services.

Next, let’s try to estimate how Tecity’s latest offer - which prices the group at $2.1 billion - implicitly values the component businesses.

Assuming MSC’s market price is fair, we can estimate its value. Translated to Sing dollars, its market cap is $254 million. STC’s 73 per cent stake is worth $185 million.

Next, we estimate the value of STC’s financial investments from its balance sheet as at Sept 30, 2007, the most recent publicly available. At the time, marketable securities stood at $90 million and long-term investments at $385.7 million. STC also held $346.5 million in cash or deposits and had $164 million in short and long- term borrowings. We make the large assumption that these values have not changed.

Subtracting these from Tecity’s offer value leaves a residual of about $1.27 billion, attached to the hotel and property business.

It also includes STC’s mining ventures in China, Australia and Africa and other non-core businesses, but we assume these are negligible.

Again from the balance sheet, STC’s investment properties and properties held for sale were worth about $710 million in total.

We assume these include the hotels, as there are no other large items listed under assets, except for plant, property and equipment, which we assume refer to mining assets.

So Tecity’s offer values the hotel and property business at about 1.8 times its core assets. We haven’t included the segment’s liabilities, so we make a rough guess that it’s valued at twice book value.

To be sure, the above analysis is highly back-of-the-envelope in nature and, published as an analyst’s report, might be sufficient to see this writer out of the door. Nonetheless, let’s see what we can observe.

First, two times book might be expensive now, given faltering interest in real estate. However, many of Rendezvous’ hotel assets are in Australia and China, which are possibly more bullish markets.

Long-term investments

Second, MSC is going through a bad patch but could soar if legal matters clear up. World demand for tin - used not only in plating but also in chemical processes - is growing. China, the world’s largest producer, is also a net importer.

Third, assets may be worth more than recorded. Last year, STC booked a once-off gain of more than $220 million because it revalued its Malaysian properties .

Its long-term investments - which are undisclosed - may also be worth much more. The acquirers, which are major shareholders, almost surely have detailed data on these holdings, which the public does not.

So really, who knows what STC is worth?

Source : Business Times - 31 Jan 2008

In an unusual case, it says $34m price agreed on by owners and developer is well below market value.

AN UNUSUAL battle over the en bloc sale of Regent Garden intensified yesterday when the Strata Titles Board (STB) threw out the sale - ruling the $34 million sale had not been done in good faith.

The showdown over the fate of the 31-unit West Coast Road condominium site is now headed for the High Court.

The case is unusual because all six dissenting minority owners had withdrawn their objections to the sale, which was inked last April.

It is now the majority owners, who signed off on the sale, who are trying to back out of the deal with buyer Allgreen Properties .

The STB said it rejected the deal because it was not done in good faith, as Regent Garden’s valuation - on which the final price was based - was wrong.

It said that Regent Garden’s $34 million sale price was well below its market value.

The deal needed STB’s formal approval as there had originally been objections to the sale.

The dispute also involves alleged extra payments made to minority owners to quell those objections.

The majority owners filed an originating summons in the High Court this month trying to overturn the sale.

They argued that the $34 million sale price was wrong partly because of a wrongly estimated $7.2 million development charge - a charge for redeveloping a site to enhance its value. The charge, payable by developers, turned out to be just $950,000.

The large disparity is not common, and a consultant said it could be due to historical reasons, as the Regent Garden site permits more space to be built than usual.

Unless those involved knew the project’s development history, they would have been unaware of this, he said.

Allgreen has also gone to the High Court to ask for an order requiring the majority owners to complete the sale deal by Feb 28.

The two cases are likely to be heard together on a date that has yet to be fixed, said a sale committee member.

Another high-profile disputed collective sale, at Horizon Towers, as well as smaller cases such as Finland Gardens, are also due to be heard by the High Court.

The STB delivered its decision yesterday in an oral statement at the end of a half-day hearing, and has yet to give the grounds for the decision.

In a statement yesterday, Allgreen said it was surprised at the STB decision to hear the case despite pending court proceedings and the fact that there had been no objectors.

A property industry source who declined to be named said the case is unique as the STB took the effort to hear the merits of the case and threw it out even though there were no objections.

In a case where there are withdrawn objections from minority owners, these owners must sign the collective sale agreement in order to be a party to the deal. If not, the STB still has to rule on it.

However, in past cases, the STB just approved a sale, and did not look into the merits of the case as there was no need to, said the source.

Allgreen said that the STB decision would have no bearing on the case in the High Court.

Its fixed sale price of $34 million was the highest among all bids, it said. Also, it had offered owners the option of a floating sale price subject to the development charge.

But the sale committee had asked for the $34 million fixed price and refused advice to pay for an official figure.

The majority owners’ allegations are ‘nothing more than belated attempts to reopen a concluded bargain and to extract a better price for themselves’, said Allgreen.

‘We will rigorously pursue our case in court.’

Source : Straits Times - 31 Jan 2008

Money placed in the care of Taoist Federation as a charity fund.

A 15-YEAR-OLD saga of a corrupt land sale that sent three Taoist devotees to prison and bankrupted one family has come to a close.

Yesterday, in a room above the watchful gods of the San Qing Gong temple in Bedok, members of the Taoist Federation said the money recovered from the lawbreakers - about $1.1 million - has been placed in its care as a charity fund.

The money, said the federation’s chairman Tan Thiam Lye, will be used to help underprivileged Singaporeans pay for school expenses, medical treatment and other welfare services. Applicants for the fund need not be followers of the Taoist faith.

The return of this money to the charge of Singapore’s Taoist community has been a long time coming.

In 1991, the land on which sat the 100-year-old Kew Thian Neo Neo Temple in Balestier Road was sold for a tenth of its value - $132,000 - after three of its four property trustees accepted nearly $1 million in bribes from its buyers.

It was torn down soon after.

Two years later, the three trustees were found out, charged, and sent to jail.

The buyers, a businessman and his son, were spared jail time for their testimony, but were slapped with $6.3 million in fines.

More than 10 years later, the Attorney-General’s Chambers has decided to stop waiting for them to pay up the fine.

The businessman died in 2004, the same year his building supplies company closed down. His son declared himself bankrupt a year later.

Of the fine, father and son coughed up $952,000. Another $147,000 was recovered from the corrupt trio, rounding up the sum to $1.1 million.

The federation has appointed three new trustees to manage the money.

Unlike their predecessors, Mr Lim Chwee Kim, Mr Tan Tee San and Madam Maih Lan Ying hold respected positions in the Chinese community. They also come with years of experience in charity work.

Said Madam Maih, who has given away millions privately in the last 60 years: ‘This is the public’s money now. There will be strict controls and checks to ensure that every cent will go to a good and deserving cause.’

The Taoist Federation is not new to managing large amounts of money.

In 2004, it was appointed by the courts to handle $250,000 that came out of a legal tussle between the trustees of another temple - the Kew Ong Yah Temple in Upper Serangoon Road.

Currently, another $1.2 million of the temple’s funds is being held by the Public Trustee. That money is expected to be handed to the Taoist Federation for safekeeping, too.

FUND WILL BE PUT TO GOOD USE

‘This is the public’s money now. There will be strict controls and checks to ensure that every single cent will go to a good and deserving cause.’

MADAM MAIH LAN YING, one of the new trustees

Source : Straits Times - 31 Jan 2008