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Far East’s West CoastPlaza 70 per centleased before launch:

Never mind the news about consumers tightening their belts or forgoing frills in the face of an economic downturn.

As far as developer Far East Organization is concerned, tenants of West Coast Plaza - its latest refurbished suburban retail offering - are all geared up for business for the upcoming festive season.

Formerly known as Ginza Plaza, the mall is now close to 70 per cent leased, said Far East deputy director for retail management Susan Leng. It has a net lettable area of 160,000 sq ft.

If negotiations involving two major tenants in the fashion industry work out, it could bring tenancy beyond 70 per cent when the mall has its soft launch onNov 15, Ms Leng said.

When asked whether the timing may have contributed to a less than full occupancy, Ms Leng said the developer had to fulfil its promise made about a year ago.

“There’s the commitment to our tenants - we must open. Because they would have planned to open and we are nearing the Christmas period,” she said. “Seventy per cent occupancy in such times; I think it’s quite decent.”

Mr Colin Tan, Chesterton Suntec International’s head of research and consultancy, however, believes the performance could be better.

“For retail, you must always open at full occupancy or close to 100 per cent. It doesn’t look good when the mall opens and there are empty spaces,” he said.

“Shopping centres are visible, so when you see empty lots, it doesn’t look good, so usually they’ll lower rents so that occupancy will go up, unless due to some reason like Sars, you lower the rents - nobody would also want to go in.”

Although she acknowledged that the mall is not immune to the current downturn, with “a couple” of tenants withdrawing due to the economic conditions,Ms Leng said suburban malls are generally more sheltered from world events than urban retail developments.

“As a suburban mall, we are meeting basic needs of students, workers in the region and residents. The turnover will not fluctuate due to events like F1 or international conventions. Conversely, we are also going to be protected from major cycles, ” she said.

Statistics from a recent CapitaMall Trust presentation bear this statement out. According to research done by Jones Lang La Salle, DTZ and CapitaLand, suburban retail rentals have showed greater resilience to economic downturns since 1993 than retail rentals in Orchard Road.

Rents for West Coast Plaza range from about $7 per square foot (psf) per month for anchor tenants to “high 20s” for the speciality stores, depending on size and location, said Ms Leng. That was little changed from the $8 to $25 psf range quoted by marketing agent Knight Frank about a year ago.

Still, Mr Tan expects Far East to lower rents to secure leases for the remaining spaces available in West Coast Plaza.

“While I would say that suburban places always have interest from retailers, the question now is whether they can afford it,” he said.

But managing director for Cushman & Wakefield Donald Han believes not running at full occupancy could be a marketing strategy on the developer’s part to gauge consumers’ response for the launch.

West Coast residents Today spoke to generally welcomed the rebranding and the new tenant mix, which includes popular eateries such as New York New York, Sushi Tei and anchor tenants like Cold Storage and Popular.
 
Source : Today - 23 Oct 2008

Trust’s fundamentals strong, rents not likely to bottom out

CAPITAMALL Trust (CMT) yesterday said that it will put upgrading plans for some of its properties on hold because of high construction costs.

Singapore’s biggest property trust also said that its third-quarter distributable income rose 14.2 per cent to $60.8 million, from $53.2 million a year earlier, as contributions kicked in from new acquisition The Atrium. Q3 distribution per unit (DPU) rose to 3.64 cents a share, from 3.4 cents a year earlier. Net property income rose 13.1 per cent to $86.9 million, from $76.8 million in Q3 2007.

The earnings were in line with expectations, analysts said. The news pushed CMT shares to their highest level in more than two weeks. The stock rose as much as 16 cents or 7.8 per cent to $2.21 before ending the day at $2.11.

Looking ahead, CMT will be cautious, will review new commitments carefully and will not sacrifice liquidity for new projects, said Lim Beng Chee, chief executive-designate of the trust’s manager. For now, enhancement programmes that have not started at three malls - Funan DigitaLife Mall, Tampines Mall and Jurong Entertainment Centre (JEC) - have been put off. Works at JEC were projected to cost about $170 million.

The trust’s fundamentals are strong as rents are not expected to bottom out in the next few quarters, said Pua Seck Guan, CMT’s outgoing chief executive. So far this year, CMT has renewed 289 leases - which make up 15.4 per cent of total net lettable area - at a 9.3 per cent increase to preceding rental rates. There is also a $12.2 million projected increase in net property income from ongoing asset enhancement works.

Analysts agreed with Mr Pua. Singapore’s retail sector remains resilient, as evidenced by CMT’s latest results, Macquarie Research Equities analysts said in a note yesterday. ‘CMT remains one of our top Singapore Reit (real estate investment trust) picks, with growth from active leasing, asset enhancements and acquisitions,’ it said. Citigroup also issued a ‘buy’ call on CMT, citing its steady income stream.

CMT has already secured refinancing for $187.5 million and $80 million of loans due in December 2008 and May 2009 respectively and is in the midst of negotiating refinancing for $673.7 million due in August 2009. Both the trust and analysts are confident funding will be secured.

‘CMT exists within the enlarged CapitaLand group, and the group as a whole is well supported by local and foreign banks,’ said UOB Kay Hian analyst Jonathan Koh. Earlier this month, CapitaLand said that with its various listed entities, it has raised more than $5 billion of debt year-to-date. In May this year, the trust raised its target asset size to $9 billion by 2010, from an earlier forecast of $8 billion. CMT agreed in May to buy The Atrium along the Orchard Road shopping belt for $839.8 million, boosting its assets to $7.2 billion at June 30.

Yesterday also marked Mr Pua’s last results briefing at CMT’s helm. He quit in September to pursue personal interests. His resignation is a ‘big loss’ and could threaten the group’s ability to grow in the longer term by acquiring under-utilised assets, said Citigroup analyst Wendy Koh. ‘However, his departure is unlikely to affect the rental income stream from existing portfolio and major asset enhancement pipeline for existing properties,’ she added.

Mr Lim acknowledged that Mr Pua has left ‘big shoes’ to fill, but is confident that the management team can fill them.

Source : Business Times - 22 Oct 2008

Squeeze on building materials and high costs cited

AMBITIOUS expansion and redevelopment plans for three leading Singapore malls have been put on hold owing to high building costs and the squeeze on construction resources here.

CapitaMall Trust (CMT) Management made the announcement when it released third-quarter financial results for the real estate investment trust (Reit) yesterday.

The redevelopment, earmarked for Jurong Entertainment Centre, Funan DigitaLife Mall and Tampines Mall, had yet to start when CMT made the announcement.

The Jurong mall was set for a 62 per cent boost in gross floor area. Funan, a purely retail property, was to be converted into a retail-cum-office complex while the purely retail Tampines Mall was to see the creation of about 95,000 sq ft of office space.

CMT Management said these plans have been put on hold in view of the current high construction cost and the competitive environment for resources.

It added that it would explore opportunities to unlock value at the properties at an appropriate time in the future.

Other announcements and financial data at CMT were positive, however.

Redevelopment works at Sembawang Shopping Centre (SSC), for instance, which commenced early last year, have progressed well and are on schedule to be completed by December this year.

They include the creation of a roof-top landscaped plaza featuring a large playground and the relocation of carpark spaces in the basement and two lower levels to the upper floors, in order to optimise rentals.

A total of $68.4 million has been set aside for capital expenditure. The increase in SSC’s value after the improvement is expected to be $31 million.

The Reit also announced that its distribution per unit (DPU) for the third quarter was 14.48 cents on an annualised basis, which is 7.3 per cent higher than the DPU for the third quarter of last year, which was 13.49 cents.

Annualised DPU for the year-to-date of 14.21 cents also exceeded the annualised DPU for the same period last year of 12.73 cents by 11.6 per cent.

CMT’s portfolio occupancy rate for the year to date was 99.7 per cent. This underscores its strong track record of close to 100 per cent occupancy. It posted a 99.6 per cent occupancy rate as at Dec 31 last year, 99.5 per cent in 2006 and 99.7 per cent in 2005.

Third-quarter shopper traffic was also 11.8 per cent higher than in the same period last year.

Mr Hsuan Owyang, CMT Management’s chairman, said: ‘We are pleased to announce the better-than-forecast third-quarter 2008 financial results amidst the global weakening economic conditions.

‘In the next few quarters, our key strategies will focus on active capital management, proactive management of our existing portfolio to sustain organic growth, and successful execution of ongoing and committed asset enhancement initiatives.’

CMT’s unit price rose six cents to close at $2.11 yesterday.

Source : Straits Times - 22 Oct 2008

High costs spur CapitaMallTrust to shelve expansion plans

The manager of mainboard-listed CapitaMall Trust (CMT) said it will shelve expansion plans for three of its malls due to high construction costs and the competitive environment for resources currently.

CapitaMall Trust Management said CMT had planned to add office space and expand the amount of retail space at Funan DigitaLife Mall (Funan); create 95,000 square feet of office space for Tampines Mall; and create a new retail floor, relocate its cineplex and add an Olympic-sized ice skating rink at Jurong Entertainment Centre (JEC). The manager said that these enhancement plans are not critical to sustain CMT’s growth. The $65.2-million differential premium and stamp duties for Funan have already been paid in June and about $16 million in differential premium has been paid for JEC.

Mr Brandon Lee, investment analyst from DMG and Partners Securities, said that it is a prudent move on CMT’s part to hold back enhancement plans and to hold cash, in view of a tighter credit market and high costs in construction.

He also said that some of the proposed expansions, for example the ice skating rink, were not necessities in current market conditions.

“As there is more supply of office space than current demand, rentals for office space might be on a gradual decline and I think CMT recognises the market conditions going forward,” saidMr Colin Tan, Chesterton International’s head of research and consultancy.

He explained that with the pessimistic outlook of the global economy causing businesses to freeze hiring, the demand for office space will fall gradually. “Now, the unknown factor is how much the demand will shrink by,” he added.

Still, CMT managed to declare a distribution per unit (DPU) of 14.48 cents on an annualised basis for the third quarter ended Sept 30, up 7.3 per cent from a year earlier. It attributed the improved performance to the acquisition of Atrium@Orchard next to Plaza Singapura, and strong occupancy, which allowed it to sustain rental yields.

Separately, healthcare real estate investment trust First Reit said its annualised DPU for the third quarter was at 7.60 cents, up 12.9 per cent from last year. Cautious expansion plans will be the strategy going forward. Dr Ronnie Tan, chief executive of Bowsprit Capital Corporation, the company managing First Reit, said that prudence will be exercised “in assessing the attractiveness, timing and sequence of future acquisitions”.

Mapletree Logistics Trust has also announced yesterday that its third-quarter DPU will be1.84 cents per unit. Looking forward, chief executive Mr Chua Tiow Chye said that the immediate focus is to optimise returns from organic growth. “At the appropriate time, we will explore opportunities that may arise when market conditions recover.”
 
Source : Today - 22 Oct 2008

PARKWAY Centre, a commercial block next to the bustling Parkway Parade mall, has been put up for collective sale by tender.

It is one of the few developments put up for collective sale in recent months as sentiment has been hit by the financial crisis.

Sole marketing agent Jones Lang LaSalle said the owners of the 99-year leasehold block in Marine Parade expect a price of around $160 million.

This works out to $1,000 per sq ft per plot ratio, which represents a premium of 40 to 50 per cent over an individual sale.

Work on the collective sale began late last year. In August, foreign funds and foreign developers with existing projects in Singapore indicated interest in Parkway Centre, said Jones Lang LaSalle’s associate director of investments, Mr David Batchelor.

He said the buyer could build an all-retail project or an office-cum-retail complex of 157,625 sq ft of gross floor area, subject to approval.

The 13-storey building, which has 72 years left on its lease, has 110 units, of which three are shops and the rest offices. There is a McDonald’s on the ground floor.

A firm linked to Hong Kong-listed Far East Holdings International, which developed the former Tang Dynasty City in Jurong, owns 40 per cent of the building.

The sale tender closes on Nov 19.

Source : Straits Times - 20 Oct 2008