SGHOUSING.COM 新加坡房地产网

Clearer picture seen emerging after award of Somerset Central site

The ageing Specialists’ Shopping Centre along Orchard Road could finally make way for a new project under proposals to redevelop the site together with the former Glutton’s Square plot next door, say sources.

BT understands that the proposals are still being discussed between OCBC Bank, which owns Specialists’ Centre and Hotel Phoenix behind it, and Far East Organization, which clinched the former Glutton’s Square site at a state tender in January.

‘One possibility is OCBC could just contribute its Specialists’ site into a joint venture that could develop this site together with Glutton’s Square without having to put any cash for the construction. In exchange, the bank gets to hold a stake in the enlarged redevelopment scheme equivalent to the value of its site,’ said a market observer.

Originally, OCBC had been talking about a need to merely refurbish Specialists’ Centre - which is more than 30 years old - in conjunction with new developments at adjacent plots. Such an approach is favoured by some quarters in the bank who have some sentimental attachment to Specialists’ Centre, BT understands. As well, a redevelopment scheme would at best see retention rather than an enhancement of the building’s existing gross floor area going by current guidelines - which somewhat reduces the incentive to redevelop.

However, sources say that given that Specialists’ Centre is more than 30 years old, its layout and efficiency (ratio of net lettable area to gross floor area) are dated, so it would still make sense to redevelop.

Discussions between Far East and OCBC are likely to be finalised only after the award of another state site, dubbed Somerset Central, on the other side of Specialists’ Centre. Part of this site, which is above Somerset MRT Station, is currently being used as a carpark. The tender for Somerset Central closes on Aug 16.

Far East is widely thought to have triggered the release of the Somerset Central plot, which was in the government’s reserve list. However, it remains to be seen if it succeeds in clinching the 78,700 sq ft site when the state tender closes in about two months.

If it does, then the latest site will be included in a bigger redevelopment. If, however, another party clinches the plot, it remains to be seen how this affects an OCBC-Far East collaboration on their respective existing sites.

It also remains to be seen if OCBC and Far East agree on including Hotel Phoenix, which faces Somerset Road, in a redevelopment involving Specialists’ Centre or if OCBC has to leave Hotel Phoenix standing and refurbish it separately.

Hotel Phoenix is safeguarded for hotel use by the authorities, which means that even if OCBC contributes the property for joint redevelopment with Specialists’ Centre and the Glutton’s Square site, it has to remain a hotel.

Some market watchers have also been speculating lately whether Far East will team up with Frasers Centrepoint to bid for the Somerest Central site given their recent successful partnership in clinching the Waterfront View residential site in Bedok.

OCBC holds an indirect interest of under 10 per cent in Frasers Centrepoint through the latter’s listed parent, Fraser & Neave.

If Far East and Frasers Centrepoint team up again and win the Somerset Central site, it could make for an appropriate partnership involving OCBC, Frasers Centrepoint and Far East for the development of Glutton’s Square, Somerset Central and Specialists’ Centre - with or without Hotel Phoenix.

This will result in a sizeable retail project boasting prime linear frontage on Orchard Road and with an underground mall linked to Centrepoint Shopping Centre across the road.

A redevelopment of all three sites including Hotel Phoenix can yield a new project with a maximum gross floor area of about 1.3 million square feet based on current guidelines.

However, the developers may even be able to win rights for additional gross floor area from the Urban Redevelopment Authority under an incentive scheme to spur redevelopments on Orchard Road, say property analysts.

Retail market watchers say, however, that the completion of a new project may clash with the opening of Marina Bay Sands in 2009 which is expected to feature about one million sq ft of retail space and boast big new names like Saks Fifth Avenue.

Viewing things more positively, a retail market player says: ‘While the jury is out on whether Marina Bay Sands integrated resort will overshadow Orchard Road as Singapore’s prime tourist belt, it makes it all the more urgent for owners of ageing Orchard Road buildings like Specialists’ Centre to wake up and do something - fast.’

Source : Business Times - 5 Jun 2006

MAPLETREE Logistics Trust Management (MLTM), manager of Mapletree Logistics Trust (MapletreeLog), yesterday said it signed a put and call option agreement to buy a warehouse in Paya Lebar Industrial Park for $38 million.

The deal, done through MapletreeLog’s trustee HSBC Institutional Trust Services (Singapore), is structured as a sale and leaseback transaction. The seven-storey warehouse building will be leased back to the vendor for five years, with an option to extend for another term of up to five years.

The Paya Lebar property is currently undergoing some upgrading works which are expected to be completed in the third quarter of this year. It has a gross floor area of about 23,367 square metres which sits on leasehold land covering an area of about 8,968 square metres. Lease tenure for the land is expected to expire in 2053.

MLTM said yesterday that the deal will be accretive to MapletreeLog’s distribution per unit (DPU) and the pro forma financial effect of the acquisition on the DPU for the financial year ended Dec 31, 2005 would be an additional 0.14 Singapore cents per unit.

MLTM chief executive officer Chua Tiow Chye said in yesterday’s statement: ‘Beyond the initial accretion, the rental escalation built into the lease agreement for this property adds moderate increase to the steady base of rental cashflows - a feature typical of our Singapore assets.’ The acquisition is expected to be completed in the third quarter of this year and is likely to be funded entirely by debt.

Source : Business Times - 22 May 2006

Winning bid to top Orchard Turn, Glutton Square

FOLLOWING a committed bid of $400 million by an unnamed developer two weeks ago, the Urban Redevelopment Authority (URA) has launched the Somerset Central site (at Orchard Road and Somerset Road) for sale by public tender.

The URA says that the selection of the successful tenderer will be based on the tendered land price only.

Interested developers have about three months to decide how much they want to bid, but market watchers are already predicting that the winning bid will top that of Orchard Turn and Glutton Square.

In December 2005, CapitaLand Retail and Hong Kong’s Sun Hung Kai Properties paid $1.38 billion or $1,020 per square foot per plot ratio (psf ppr) for Orchard Turn.

Far East Organization then paid $1,085 psf ppr in January for Glutton Square.

Knight Frank’s head of research, Nicholas Mak, predicts that the top bid for Somerset Central could be as much as $1,140 psf ppr.

The 0.7 ha site that is above the Somerset MRT Station can yield a maximum gross floor area (GFA) of 39,419 sq m, but at least 60 per cent must be set aside for retail, F&B and/or entertainment use.

The remaining GFA can be used for other commercial and complementary hotel and residential uses.

Although mostly cut off from the busy Grange Road/Orchard Road junction by Orchard Shopping Centre, one of the special features of the site is for the winning developer to construct a deck over part of the Stamford Canal within the site, creating an open pedestrian mall lined with shops and outdoor refreshment areas, to enhance pedestrian connectivity.

In addition, the new development will also have a through-block pedestrian link at the first storey to provide a direct connection to the Somerset MRT Station.

The tender will close at noon on Aug 16.

Source : Business Times - 17 May 2006

PRIME office rents in Singapore are rising rapidly. Rents which at present work out at $5 per square foot (psf) per month could go up by as much as 60 per cent by the end of next year, says a new research report from UBS bank.

By 2010, office rents could even test the previous peak of $10 psf per month seen in the mid-1990s, the report says.

Charles Neo, the bank’s co-head of Asian real estate research, says: ‘The demand for office space is underpinned by limited supply and strong demand from the financial services sector.’

Mr Neo notes that offices are cheaper in Singapore than elsewhere in the region.

Rents here have been going down for 10 years, although there has been five years of growth in the financial services sector.

UBS sees rent levels for offices at Six Battery Road increasing from the present $5.10 psf per month to $6.70 psf per month by the second half of 2009, while rents at Capital Tower go up from $4.50 psf per month to $6.20.

The bank has a ‘buy’ rating on the owner of the two office buildings, CapitaCommercial Trust, which it sees as providing exposure to the cyclical upswing in rent levels.

Mr Neo likes real estate investment trusts (Reits) with exposure to the prime office and retail sectors in Singapore, arguing that ‘both retail and office sectors offer organic growth that could compensate rising inflation’.

UBS says that although there may be more ‘destination’ shopping malls over the next few years, this is likely to affect only poorly managed and over-rented malls.

Mr Neo expects ‘record visitor arrivals, sustained low unemployment and increased residential property prices over the coming years’ to help sustain economic momentum.

The market capitalisation of Singapore’s Reits has grown from US$1 billion to US$8 billion in the past two years and UBS sees this figure doubling in the next 12 months to US$16 billion.

In a separate announcement yesterday, UBS said Regina Lim has joined its real estate research team, reporting to Mr Neo.

Ms Lim joined UBS from the Urban Redevelopment Authority of Singapore where she led the commercial property research team responsible for analysing the Singapore office and retail markets.

Source : Business Times - 9 May 2006

Demand driven by companies, with some even looking to expand offices

THE occupancy rate for prime office space island-wide rose in the first quarter of this year.

According to a report by DTZ Debenham Tie Leung (DTZ), the Raffles Place area registered the highest percentage point gain of 2.8, to hit 91.6 per cent. This area also had a quarter-on-quarter rental increase of 8.6 per cent, with rents reaching an average of $6.10 per square foot (psf) per month.

This is 23 per cent off the last peak of $7.90 psf per month in 2001.

Rents asked for One Raffles Quay and Republic Plaza I are higher at $8.50 psf per month.

DTZ executive director Ong Choon Fah says demand is driven by financial institutions, with some even looking to expand their existing offices. ‘When these companies first come here, they don’t set up a big office immediately,’ she notes.

The office space market is, however, volatile as there is little supply to meet demand. DTZ says rents will continue to soar over the next four years with an average new supply of 1.1 million sq ft per annum versus average annual demand of 1.9 million sq ft in the past decade.

This could change when the new Business & Financial Centre opens in 2010. But Ms Ong believes older properties will be rejuvenated and the market ’should take care of itself’.

Interestingly, the highest quarter-on-quarter rental increase was for property on the city-fringe.

The Novena Belt registered an increase of 17 per cent to $5.50 psf per month, while HarbourFront rents increased 11.7 per cent to $4.30 psf per month. ‘Offices that don’t need to be in the financial centre have moved to these areas,’ says Ms Ong.

This trend is also noted by CB Richard Ellis (CBRE) executive director (office services) Moray Armstrong, who says: ‘The decentralised office markets have proven to be an attractive alternative to the CBD, particularly for companies or operations that are more sensitive to real estate costs.’

He says examples of these tenants include the back-office or infrastructure operations of banks, IT support centres and some tenants in the energy sector.

Noting the popularity of HarbourFront, he adds: ‘Improved access following the opening of North-East Line has helped, but the related developments of quality retail at VivoCity and entertainment space has also been an important factor in attracting tenants.’

CBRE figures show that in some decentralised areas - such as Tampines Regional Centre, Jurong East Regional Centre and Thomson/Novena - vacancies hovered around 2 per cent in Q1 2006.

The trend to split office operations is a regional one. Jones Lang LaSalle head of research (Asia-Pacific) Jane Murray say: ‘As vacancy rates in most Asian cities continued to fall, some corporate occupiers were opting for secondary locations to support their expansion and defray costs.

‘However, this trend is unlikely to impact on CBD rents given the prominence of such choice locations.’

Source : Business Times - 9 May 2006