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Swissotel Merchant Court could fetch $350m in tender

SWISSOTEL Merchant Court, a 476-room hotel near Clarke Quay, has been put up for sale by global tender.

It could fetch about $350 million, given the growth potential in Singapore’s hospitality sector, consultants said. Room rates start from about $250 a night, hotel booking websites show.

‘A hotel in (that) location can fetch around $700,000 to $800,000 per key,’ said Mr Mike Batchelor, managing director of Asia investment sales for Jones Lang LaSalle Hotels, which is handling the sale.

Owner Merchant Quay is controlled by fund manager LaSalle Investment Management, which bought the Swissotel Merchant Court for an undisclosed sum from Colony Capital early last year. It is rumoured to have paid under $200 million.

The hotel was one of 41 properties in the Raffles Hotels and Resorts chain that Colony Capital bought in 2005 for $1.45 billion from CapitaLand’s Raffles Holdings.

‘Singapore remains one of Asia’s most tightly held hotel investment markets and it is rare for more than one international standard hotel to be offered to the market in any given year,’ said Jones Lang LaSalle Hotels yesterday.

Mr Batchelor said: ‘High on the shopping list of international investors are countries such as Singapore which have the sustained support of their governments.’

Investors, including wealthy individuals from Asia, Russia, Europe and the Middle East, also like the fact that Singapore is a key gateway city, he said.

Singapore has a 10.8-million visitor target this year but arrivals registered the first decline in 51 months in June. July figures were also down.

The hotel investment market is slightly more cautious now but still optimistic, said the managing director of Cushman & Wakefield, Mr Donald Han.

Investors typically take a five- to 10-year view of the market and outlying fundamentals here are very strong, said Mr Batchelor.

‘In line with strong growth in visitor arrivals to Singapore and rising room rates, hotel values have increased.’

Swissotel Merchant Court recently went through a multimillion-dollar refurbishment, hence its contemporary-style rooms now provide a platform for future revenue growth, he said.

Whoever buys it will have the opportunity to further enhance the asset by redeveloping the prime riverfront space overlooking Clarke Quay, he added.

Source : Straits Times - 29 Aug 2008

These assets have been priced down by 25-100 bps in last few months: DTZ

COMMERCIAL properties in the Asia-Pacific region have been priced down by 25-100 basis points in the past three to four months, more in line with investor expectations, property firm DTZ said yesterday.

‘The number is an average figure - it varies from market to market,’ said John Stinson, DTZ’s regional director for sales and investments and capital markets for Asia-Pacific.

Mr Stinson, who was speaking to reporters at a seminar, said the re-pricing has been greater in some markets, such as Tokyo and Australian cities.

For Singapore, it is hard to pin a number to the drop in the asking prices for commercial properties, mainly because of a low number of transactions, he added. But some sellers have marked down their commercial assets about 10 per cent, said Shaun Poh, DTZ’s senior director for investment advisory services and auction in Singapore.

Mr Stinson identified Singapore as one of the ‘gateway cities’ that international investors will look at when increasing their exposure in the Asia-Pacific area.

‘In the next two-three quarters, core (prime) products in gateway cities - Hong Kong, Singapore, Tokyo and Sydney - will see some interest,’ Mr Stinson said.

In Singapore, the opportunities for investors are increasing as vendors price their assets lower, he noted.

DTZ’s executive director and regional head for consulting and research Ong Choon Fah said: ‘Owners are a bit more realistic now than they were previously.’

Right now, there are still more sellers than buyers in Singapore, according to a recent survey of investors by DTZ. More than 10 per cent of investors had ’selling priorities’ while less than 5 per cent had ‘buying priorities’, the survey found.

‘Buyers are sitting on their hands, waiting for the markets to adjust,’ said David Green-Morgan, DTZ’s Asia-Pacific research director.

DTZ’s research also showed that across the Asia-Pacific region, investors with ‘buying priorities’ outnumber those with ’selling priorities’ when it comes to industrial and hotel properties.

Mr Green-Morgan noted that investments into Singapore and the region are likely to continue to be driven by private equity.

In July, DTZ predicted that the value of investment transactions worldwide will fall to US$500 billion this year, from a high of US$730 billion in 2007 and US$600 billion in 2006.

The decline assumes that after a weak first half in 2008, there will be a relatively modest pick-up, likely to be driven mainly by the Asia-Pacific market.

Source : Business Times - 26 Aug 2008

CLARISSA TAN looks at some mega projects JTC is undertaking to equip S’pore for the 21st century

DEEP into the earth, more than 100 metres below sea level, will lie the Rock Cavern. This series of gigantic subterranean tunnels will store millions of cubic metres of petroleum.

Bobbing on the waves, meanwhile, you may see a Very Large Floating Structure, a series of seaborne platforms, also for stocking oil. And if you gaze upward, you could catch a glimpse of the latest and fastest aeroplanes taking off from Aero+sPace.

These are the future industrial spaces of Singapore. They are now being constructed or planned by the Jurong Town Corporation, which for four decades has been the main architect and developer of the nation’s industrial landscape. For the 21st century, the Corporation appears to accept no boundaries - not even that of space.

‘JTC must keep on pushing the limits of possibilities, to try out new ideas, and seek opportunities beyond known frontiers,’ said Prime Minister Lee Hsien Loong at JTC’s 40th anniversary in June.

‘Land will always be scarce in Singapore, but with human creativity and ingenuity, we can find new ways to do more with the limited amount we have. One way is to go underground,’ he added.

The Jurong Rock Cavern is located beneath Banyan Basin on Jurong Island, itself an engineering feat created by land reclamation that joined seven smaller islands. Construction work is in progress, with Japanese firm Sato Kogyo building access shafts and start-up galleries.

Phase 1 of the project, to be completed by 2014, will yield a capacity of 1.47 million cubic metres of storage space for liquid hydrocarbons such as crude oil, condensate, naphtha and gasoil. Phase 2, with a potential to add another 1.32 million cubic metres, is being planned. Both phases have received strong interest from industry players, particularly specialist chemical manufacturers already on Jurong Island.

Meanwhile, JTC has concluded a feasibility study, carried out with the Maritime and Port Authority of Singapore and the National University of Singapore, which has found that a storage facility on Singapore waters - currently dubbed the Very Large Floating Structure or VLFS - is indeed viable.

The VLFS will be designed as floating platforms that are either moored to land or operated as standalone units. Its core structure will likely be made of concrete, chosen for its fire-resistant qualities. It will take space-saving to unprecedented levels - the storage capacity of 300,000 cubic metres will occupy no more than five hectares of space on land, compared with 20 hectares for a comparable conventional facility.

‘JTC will proceed further with detailed studies and if everything goes according to plan, Singapore will be the first nation in the world to have a floating oil storage structure made of concrete,’ said JTC’s chief executive Ow Foong Pheng in the 2007 annual report.

Both the Jurong Rock Cavern and the VLFS will help address the overwhelming need for more oil storage, with the global demand for energy expected to jump by 50 per cent in the next two decades.

Infrastructure works for another huge industrial space - Seletar Aero+sPace - have started, with the first phase of development allocated. The 140-hectare project will transform the area surrounding Seletar Airport into a specialist park that will host maintenance, repair and overhaul (MRO) players, as well as the design and manufacture of aircraft systems and components.

British aerospace heavyweight Rolls Royce has sealed a contract to invest $320 million in a facility at Seletar Aero+sPace. This so-called ‘factory of the future’ will assemble and test large-scale civil engines for Boeing and Airbus. Other big names that have signed up at the park include Pratt & Whitney and homegrown ST Aerospace.

One reason why JTC can afford the huge investment of time and effort in these mega projects is its divestment strategy. In October 2006, it said it would divest its high-rise, ready-built industrial property portfolio through a combination of a real estate investment trust (Reit) and trade sales.

The corporation’s plan is to gradually exit from segments of the industrial property market where the private sector already plays an active role.

‘This will help to pave the way for a more vibrant industrial landscape with greater involvement by the private sector,’ JTC chairman Cedric Foo has said. ‘Moving ahead, JTC will focus on playing a key role in strategic projects with longer payback periods.’

One such ongoing project is one-north, called thus because it is located one degree north of the equator. This 200-hectare project around the Buona Vista area is dedicated to what JTC calls the ‘knowledge economy’ - knowledge-intensive sectors such as biomedical sciences, infocomm, media, science and engineering.

Biopolis, the first major complex within one-north, is now an established biomedical centre hosting players from the public and private sectors. The massive project is now in Phase 3, which includes the construction of a 41,500 sq metre space for research and development in clinical and translational medicine.

Heritage buildings

Now all eyes are on Fusionopolis, another cluster designed as a place where ’science, business and the arts converge’. Phase 1 of the project - the iconic two-tower structure designed by the late architect Kisho Kurokawa - has been completed and is fully taken up. It is dedicated to the media and infocomm industries. Phases 2A and 2B - which will house business and laboratory space - will be completed by 2010.

The development of Phase 2B was awarded to Soilbuild Group Holdings, illustrating JTC’s commitment to public-private partnerships.

Crowning the one-north area will be the Civic, Cultural and Retail Complex (CCRC), a lifestyle-cum-entertainment complex situated in another cluster called Vista Xchange. Among other things, the CCRC will have a 5,000-seat auditorium for concerts and other huge functions.

Amid all these futuristic developments, JTC is preserving some nuggets of the past. The picturesque colonial black-and-white houses at Seletar Estate, for example, will be re-used as training facilities for the aviation campus of Seletar Aero+sPace. There are similar heritage spots within one-north, such as Rochester Park and Wessex Estate.

The history of JTC is inseparable from the history of Singapore. From the very first zinc-walled factories that the Corporation built as a temporary measure in a newly independent nation to the teeming industrial hubs that are now Jurong Island, Tuas, Changi and Jurong Port, it has made the country a case study of how scarcity of natural resources can be overcome by ingenuity, hard work and with an eye on the bigger picture.

Throughout its 40 years, JTC has been consistent in one thing - its ability to deal with change and with the unexpected

‘Our best-laid plans will have to be modified and updated as new challenges emerge,’ PM Lee said at the dinner. ‘Hence JTC must remain dynamic and nimble, keeping an eye on business trends, and responding promptly to new threats and opportunities”

If the past is anything to go by, then JTC is well equipped for the future.

This is the last of a four-part series brought to you by JTC Corp

Source : Business Times - 26 Aug 2008

It beats 2 firms to clinch the $1.77m award from JTC

NEWLY listed Tritech Group has won the tender to study possible economic uses for Singapore’s underground rock caverns (URCs), which could range from power stations and wafer fabs to research and development labs, airport logistics centres and water reclamation facilities.

BT has learnt that Tritech, just listed on the Catalist board, beat two geological engineering specialist groups - Geostock and Amberg & TTI Engineering - to clinch the $1.77 million study award from JTC Corporation, which is the coordinating government agency for the project.

Tritech, which specialises in geotechnical, ground and structural engineering, has to work with various state agencies because of the many possible uses for the caverns.

For instance, it will work with the Energy Market Authority on power stations, the Civil Aviation Authority of Singapore on airport logistics and the Public Utilities Board on water reclamation facilities.

JTC, which called for tenders in May from firms with URC experience and expertise, awarded the contract to Tritech last week. ‘Timelines for the study will now be discussed with Tritech,’ a JTC spokeswoman told BT.

Tritech will have to identify and study URC use in other countries and examine the technical and operational feasibility of such uses here. It will also have to look at issues including environment, health, public reaction on matters like radiation and pollution, harmful airborne particles and damage to existing buildings or infrastructure.

Because of land constraints, Singapore has so far used URCs for munitions storage. And JTC has started work on the first phase of the $700 million Jurong Rock Cavern (JRC) beneath Jurong Island to store crude and oil products

In the same vein, it is looking at building offshore platforms for oil terminals, desalination plants and container terminals

Tritech will get a boost from the URC tender. Engineering services have so far contributed 61 per cent of its revenue. It has played a role in the MRT Circle and Downtown lines as well as the JRC

Source : Business Times - 26 Aug 2008

Many are struggling to maintain bottom line, but no relief in sight yet

For a retailer, it is a nightmare scenario - getting stuck in a shop with expensive rent that attracts no shoppers.

Yet retail rental levels, especially in prime areas, are still skyrocketing despite the slower economy.

That has left industry players wondering if retailers who committed to lease shop spaces at very pricey levels have over-extended themselves.

‘The top retail rents of about $80 per sq ft (psf), which were announced recently by Ion Orchard, are a cause for concern,’ said Mr Colin Tan, head of research and consultancy at Chesterton International. ‘How do you ensure a reasonable profit?’

Said Mr Nash Benjamin, chief executive of fashion retailer FJ Benjamin: ‘Very, very few people can pay that rate. It’s a top-end rate which everyone’s making big noise about, but it’s neither a realistic nor sustainable rate.’

‘A lot of retailers are struggling,’ noted Ms Lau Chuen Wei, executive director of the Singapore Retailers’ Association.

She said: ‘(It’s getting) more difficult for retailers to maintain top line sales. And what’s hitting them quite hard is sustaining the bottom line.’

According to Jones Lang Lasalle, average retail rents are about 27 per cent higher than they were 10 years ago.

They stood at an average of $41.25 psf a month in the first quarter of this year, compared to about $32.50 psf a month in the first quarter of 1998.

They have risen about 57 per cent since the rock-bottom days of the Asian financial crisis, when they hit $26.25 psf in the first quarter of 1999.

CB Richard Ellis said ’super-prime space along Orchard Road saw the highest quarterly increase of 5.3 per cent, hitting an average of $54.40 psf a month’.

‘If the shop size is very small and the shop is situated in a very busy place, the rentals can be as high as $60 psf or more. (But) the majority will be between $10 and $50 psf,’ said Mr Nicholas Mak, Knight Frank’s director of research and consultancy.

Retailers interviewed by The Straits Times all sigh with despair at the rising rentals, which property consultants say show no sign of abating yet.

‘Quite a good number of retailers are getting worried about whether they can sustain present sales volumes in the current economic slowdown,’ said Mr Danny Yeo, Knight Frank’s director of retail.

‘But have they been complaining that sales have dropped by a very substantial amount? I don’t think so.’

Other industry experts agree, saying that demand for prime retail spaces remains high.

Rising demand is reflected in the rising occupancy rate, said Mr Mak, who added that the average occupancy rate for retail space in Orchard Road rose from 95.4 per cent in the middle of last year to 96.7 per cent in the middle of this year.

Knight Frank said in a recent research brief that the projected supply of five million sq ft of retail space expected to be completed next year will ’serve to relieve the supply crunch seen over the past couple of years’.

It added that ‘retailers can look forward to higher retail sales psf’ as the nominal retail sales figure is expected to rise from $650.60 psf last year to almost $700 psf in 2010.

And it seems the so-called retail hot spots have remained roughly the same through the years.

Property consultants are unanimous that Orchard Road remains Singapore’s primary and premier shopping belt, mainly because of its central location and the large density of malls on the strip.

Said Chesterton’s Mr Tan: ‘Orchard Road has been Singapore’s only major shopping belt. Other shopping areas just cannot match up to Orchard Road in terms of size, quality and variety.’

‘If we classify retail hot spots according to the level of shopper traffic, the malls nearer to Orchard MRT Station would still be considered the hottest,’ said Ms Daisy Loo, head of leasing and consulting at Sandalwood Retail.

By these experts’ definition, malls such as the upcoming Ion Orchard and Orchard Central would certainly make it to the ‘Singapore’s hottest retail spaces’ list and continue commanding premium rental rates from retailers.

So would the Orchard Road-facing double-storey stores in existing malls Ngee Ann City, Wisma Atria, Paragon and Mandarin Gallery.

‘At the end of the day, it’s who wants who more,’ said Ms Lau.

‘We’ve heard of times when the mall can bend backwards to accommodate what the tenant wants.’

Said Mr Yeo: ‘I think, going forward, retailers contracting for renewal will just be more careful about committing to a $60 or $80 psf kind of rent.’

Mr Benjamin said: ‘I always tell our landlords to please remember one thing - You own the property but we are your customers. If we can’t afford to rent your premises, you have a problem. So be nice to your customers.’

Singapore’s hottest retail spots

1: Ion Orchard

Location: Being built at the corner of Orchard Road and Orchard Turn

Top rental range: $60 to $80 per sq foot (psf) per month

Star tenants: Six double-storey stores totalling 50,000 sq ft, including luxury fashion brands Prada, Louis Vuitton and Cartier

2: Wisma Atria

Location: On Orchard Road between Ion and Ngee Ann City

Top rental range: $55 to $70 psf

Star tenants: Double-storey Nike concept store, totalling 8,000 sq ft, which has taken over the former Topshop space.

3: Mandarin Gallery

Location: At the corner of Orchard and Bideford Roads

Top rental range: $50 to $60 psf

Star tenants: Double-storey stores, ranging from 2,700 sq ft to 6,800 sq ft, for Emporio Armani, Marc by Marc Jacobs and D&G.

4: Ngee Ann City

Location: At the corner of Orchard and Bideford Roads

Top rental range: $40 to $60 psf

Star tenants: Luxury giants Chanel and Louis Vuitton on the first floor. They are due to expand into double-storey spaces, or duplexes, over the next two years - Chanel into a 7,000 sq ft store and Louis Vuitton into a 10,500 sq ft one.

5: Paragon

Location: At the corner of Orchard and Bideford Roads

Top rental range: $40 to $60 psf

Star tenants: Four duplexes facing Orchard Road, ranging in size from 3,600 sq ft to more than 10,000 sq ft, to be occupied by luxe labels Gucci, Salvatore Ferragamo, Prada and Tod’s.

Note: Rental figures provided by Mr Danny Yeo, director of retail at Knight Frank

Source : Straits Times - 23 Aug 2008