PLANS to redevelop UIC Building have materialised after United Industrial Corp (UIC) yesterday paid an estimated development charge of $160.1 million to the Urban Redevelopment Authority (URA) to intensify the use of the land.

The building at 5 Shenton Way will be torn down to make way for a mixed development project comprising 60 per cent residential and 40 per cent commercial space, with a gross floor area of 926,589 sq ft.

According to an earlier report, the residential component may yield 593 units.

Analysts expect the residential units to be well received. Units at nearby One Shenton, which is 93 per cent sold, have regularly transacted at above the $2,000 per sq ft mark.

In February, UOL group chief executive Gwee Lian Kheng disclosed that UIC had won in-principle approval from the URA to convert UIC Building into a mainly residential development.

No firm decision was made then as the UIC board was assessing all alternatives to ensure the best use for the property.

UIC is a 32 per cent-owned associate of UOL.

In its statement yesterday, UIC said the redevelopment of the Shenton Way building will be financed by internal funds and bank borrowings.

UIC shares, which are thinly traded, eased one cent to $2.18 on a turnover of 98,000 units.

UOL shares fell five cents to $3.93 on a turnover of 471,000 units.

Source: Straits Times, 31 Aug 2010

FAR East Organization yesterday released for lease 31 out of the 69 medical suites at its upcoming Novena Specialist Center. Ranging in size from 549 to 1,442 square feet, they will be rented out for $8-9 per sq ft (psf).

Novena Specialist Center is part of a $350 million hotel and commercial complex the developer is building. Besides the 69 suites, the project will also house a 428-room Oasia Hotel.

Far East is upbeat on the prospects of Novena Specialist Center, which will be ready by January 2011.

The centre is next to Far East’s existing Novena Medical Center, which was completed in 2007. That development has 145 suites. So far, 100 medical suites have been sold, while another 35 have been let for $8.50-10.50 psf.

‘With the increasing number of international patients coming to Singapore for treatment and check-ups and a growing local population, demand for medical services will increase. This translates to a rising need for medical suites,’ said Far East’s executive director GL Yap.

The number of medical tourists coming to Singapore has climbed from about 200,000 in 2003 to 646,000 in 2008. But the supply of purpose-built medical suites has not kept up with demand, Mr Yap said.

‘Occupancy at these facilities has stayed at near-full level since 2004,’ he said. ‘And leasing rates have doubled across the board now. This shows there is still pressure to satisfy this need and increase Singapore’s medical services capacity to serve demand from the region and the resident population.’

Mr Yap said the Novena medical cluster has attracted a lot of interest from groups that plan to expand their networks of clinics and doctors who intend to set up their own private practice.

The area is home to Tan Tock Seng Hospital, Johns Hopkins Singapore International Medical Centre, KK Women’s and Children’s Hospital, Thomson Medical Center, the National Neuroscience Institute, and the future Parkway Novena Hospital.

Source: Business Times, 31 Aug 2010

UNITED Industrial Corp (UIC) yesterday said that it has paid a development charge of $160.1 million to the Urban Redevelopment Authority (URA) for the redevelopment of UIC Building.

Located at 5 Shenton Way, the building will be redeveloped based on a 60 per cent residential and 40 per cent commercial scheme with a gross floor area of about 926,589 sq ft, said UIC in a statement.

It added that the redevelopment will be financed by internal funds and bank borrowings, and is not expected to have any material impact on the net tangible assets and earnings per share of the group for the current financial year ending Dec 31.

The news comes after the company said in February that it had won in-principle approval from the URA to convert the building into a mainly residential development.

It was undecided on how exactly to redevelop the property at that time, with UOL group chief executive Gwee Lian Kheng saying that it was assessing all alternatives to ensure the best use for the property.

Its announcement in February came at a time which saw numerous property developers opting to convert office buildings in the central business district for residential use amid climbing luxury home prices, and falling office rents – though the office rental market is now on the mend.

Standard Chartered Bank’s head of Asean property research Regina Lim said to BT earlier this month that the average monthly Grade A office rental value will end the year at about $10.20 per square foot, up 26 per cent from end-2009.

Earlier this month, UIC reported that net profit rose to $79.1 million for the second quarter from a net loss of $251.8 million a year ago.

Revenue rose 7 per cent to $291.8 million from $271.5 million in the corresponding period last year.

The quarter saw it book fair-value gains of $19.8 million on investment properties held by subsidiaries, as opposed to fair-value losses of $526.1 million a year earlier.

Yesterday, UIC’s counter closed one cent lower at $2.18.

Source: Business Times, 31 Aug 2010

A hefty rental hike for Sunset Way eateries led to shock and awe. The detente that followed appeased the stayers.

The bruising war in the niche area, touted as the next Holland Village, erupted nearly three months ago.

The master tenant for the eateries, Circles International Solutions (CIS), had on June 1 raised rentals by up to 80 per cent.

At least five eateries at Block 106 in Clementi Street 12 were riled, The Sunday Times reported on June 20.

Several reacted by basically issuing an ultimatum: ‘Lower rentals or we move out.’

Now that the dust has settled, two have closed their outlets, one has changed hands, while two others have decided to stay.

Thai restaurant Yum Yum Thai and cafe bar Sunset Tavern have called it a day, while seafood restaurant Fortune Cuisine has changed owners.

‘We cannot afford the new rent,’ said Yum Yum Thai’s owner Nelson Yeo, 60, whose restaurant has been in the red since 2007.

Mr Yeo was paying about $7 per sq ft (psf) before it was increased to close to $8 psf.

Fortune Cuisine’s former owner Andrew Lian, 46, told The Sunday Times he, too, had made a loss in the past year.

‘Any increase in rent, no matter how little, will mean more losses,’ said Mr Lian.

Two of the stayers are steakhouse Grill-Out! and Megumi Japanese Restaurant – after managing to lower their rent.

Grill-Out!, hit with the highest hike of about 80 per cent – from $4,800 to $8,800 a month – got its rent substantially reduced after a few rounds of negotiations.

‘Having sunk in so much initial investment, we want to stay,’ said Ms Elicia Lim, 45, consultant for Grill-Out!.

She finds the new 12 per cent increase in the first and the second year ‘reasonable’.

The five eateries invested $150,000 to $300,000 each when they opened for business in 2007.

They set up shop at Block 106 as part of a million-dollar revamp initiated by Holland-Bukit Timah GRC and the Housing Board to model Sunset Way after Holland Village.

The HDB had paid 13 provision shops there to retire under the Restructuring Programme for Shops (RPS) scheme.

The block also benefited from another scheme, Revitalisation of Shops (ROS), which co-funds the sprucing up of shops in HDB estates to compete with malls.

Sunset Way is the only HDB-developed location to have tapped into two schemes – RPS (ended in 2007) and ROS (ongoing) – and to be let out to a master tenant.

The HDB said its objective of turning the place into a popular dining destination has been met.

‘From our records and survey, residents and retailers affirmed that Sunset Way became more vibrant after RPS,’ said a spokesman for the HDB.

But some tenants beg to differ. Rocky Pizza’s boss Dan Cooley said: ‘This place is remote and traffic is not very high. We’re not along the main road.’

Yum Yum Thai’s Mr Yeo agreed. ‘This place is still very quiet – no different from last time,’ he said.

The owner of one well-known restaurant in Dempsey Road, who declined to be named, said he would rather pay more to be at Dempsey.

‘The vibrancy at Sunset Way faded after its novelty factor wore off,’ he said.

Rentals at Sunset Way, at between $5 and $8 psf now, are only slightly below those in the more happening Dempsey Road and Tanglin Village.

Rentals at Tanglin Village range from $8 to $12 psf, while rates at Holland Village are between $10 and $30 psf.

When asked if he felt Sunset Way was ‘less happening’, CIS business development manager Victor Koh said: ‘If Sunset Way is not good, then why are all the tenancies taken up?’

Source: Straits Times, 29 Aug 2010

Deals involving the two prominent buildings may shake up the office market

CHEVRON House could be the next big office deal on the cards, say market watchers. This follows the sale of about $1.9 billion worth of office blocks so far this year. Chevron House was bought by Goldman Sachs funds in late 2007 for $730 million or about $2,780 per sq ft of net lettable area and the purchase was mostly funded by a consortium of lenders led by Standard Chartered. That financing facility is understood to be expiring in October and the bankers and Goldman Sachs are said to be weighing their options.

BT understands that potential buyers have been knocking on the doors of Goldman Sachs and the lenders and that property agents could soon be appointed to conduct a sale process such as a tender or expression of interest. ‘The way I look at it, Goldman could have about three options – seek refinancing, bring in a joint venture partner or sell the asset completely,’ suggests an industry observer.

Analysts say that the consortium of banks could have loaned the Goldman funds about 65 per cent of the 2007 purchase price, which would work out to about $1,800 psf of net lettable area. The loan-to-value covenant on the financing facility would have been breached sometime ago following the steep slide in office capital values last year. Interest coverage ratio for Chevron House would also have fallen on lease renewals in the building; average Grade A office rents in Singapore today are about $9 psf a month, or 40 per cent lower than the $15 psf three years ago.

Analysts polled by BT estimate the property could fetch anything from about $1,900 psf to $2,200 psf (or about $500 million to $577 million). The most recent benchmark would be the $2,125 psf that Ho Bee achieved when it sold four office floors at Samsung Hub at Church Street. While Samsung Hub is a much newer asset and stands on a site with superior leasehold tenure (999 years) than Chevron House (which is on a site with 78 years’ remaining lease), the latter boasts a more choice location next to Raffles Place MRT Station.

Goldman Sachs funds also bought Hitachi Tower, behind Chevron House, in early 2008 for $811 million or about $2,900 psf of NLA. Stanchart also heads the consortium of lenders for that purchase; the financing facility is said to end early next year. So a sale of Hitachi Tower could also be on the cards a little later down the road.

Hitachi Tower would be worth more than Chevron House, say analysts, citing its superior land tenure (999 years) and facing (along Collyer Quay). However, one drawback about the asset is the impending departure of American Express – which is said to occupy about 70,000 sq ft – to Marina Bay Financial Centre Tower 2.

Last week, Goldman Sachs funds sold DBS Towers One and Two along Shenton Way for $870.5 million or around $970 psf of NLA, marking the biggest commercial property deal in Singapore since mid-2008. Goldman Sachs reaped a profit from that deal, having paid $690 million for the property in 2005.

Some of the blocks sold this year were ‘pure office’ deals, that is the buyers bought the assets on their existing office use – such as 1 Finlayson Green and Robinson Point – while others such as Chow House and StarHub Centre were probably acquired for their potential for redevelopment into other uses.

Interest from both local and foreign investors in the Singapore office market has been warming on the back of recovering office rentals and the easier climate for fund-raising.

Source: Business Times, 21 Aug 2010

SINGAPORE’S prime industrial, retail and office properties offer some of the most attractive returns in the world, according to a new study by DTZ.

The property consultancy launched a set of fair value indices yesterday, derived by forecasting the returns commercial property investors can get above government bond yields, over five years across 180 markets.

Markets where expected returns exceed required returns would be labelled ‘hot’. The larger the number of hot markets in a region, the higher its index score would be.

Results showed that Singapore was a hot market in the second quarter. The island’s industrial property sector came in as the most attractive to invest in, ahead of Antwerp and Hong Kong in second and third places respectively. DTZ estimates that industrial assets here were underpriced by some 11 per cent.

Industrial rents are ‘expected to return to growth this year in Hong Kong and Singapore after an extended period of weakness’ that started in H2 2008, DTZ said in a release.

Singapore’s retail property sector took third spot in terms of investment attractiveness, behind first-placed Los Angeles and second-placed Chicago. DTZ found that malls here were underpriced by 9 per cent.

Offices in Singapore were also underpriced by around 9 per cent, but the presence of even better returns in other cities meant that the country fell out of the top three spots. The office market in San Francisco offered the best value, followed by that in Hong Kong and Tokyo.

DTZ believes that office rents in Singapore will register strong growth in the next five years – they could rise 5-10 per cent in H2 this year – and this will lead to capital growth. Its global head of forecasting Tony McGough added that Singapore’s office market is likely to stay hot in the next few quarters.

The reading for the global fair value index was 62 in Q2, surging from 24 a year ago, reflecting the increased number of investment opportunities brought about by the economic recovery.

The Asia-Pacific index had a score of 67, meaning that the region’s commercial property market offered relatively better returns.

But pickings were richest in the US – its index clocked a reading of 89. According to DTZ’s Asia-Pacific business development and client services head David Watt, many investment funds are focusing their attention on buying opportunities in the US now. The thinking is, ‘we know Asia is a great story, but we’ll get back to it’, he said.

The index for Europe had a score of 49, the lowest among the three regions.

Source: Business Times, 20 Aug 2010

Index sees commercial real estate in region promising better returns than that in Europe

A NEWLY launched global property index covering commercial real estate sees Asia-Pacific markets as more attractive than those in Europe but less so than that in the United States.

The Fair Value Index, as it is called, is compiled by property consultancy DTZ and offers investors an insight into the relative attractiveness of global markets over a five-year investment period.

The Asia-Pacific region scored 67 on the index in the second quarter, outstripping the global score of 62 and beating Europe’s 49, but lagging behind the US’ score of 89. A score above 50 indicates a hot market as expected returns exceed risk-adjusted required returns. Anything below 50 means a market is cold.

Mr David Green-Morgan, DTZ’s head of Asia-Pacific research, said that Hong Kong, Singapore and Tokyo offer some of the most attractive opportunities across office, retail and industrial properties.

‘Hong Kong and Singapore, two traditionally volatile markets, are set to record strong rental growth, particularly in the office sector, over the next five years as they rebound from sharp falls in rents in 2009,’ he said. ‘This will result in strong capital growth, boosting returns for investors and placing both markets in the hot category across the board.’

While the office sector in the Asia-Pacific region is leading the way with a score of 70, all three sectors – office, retail and industrial – offer opportunities to investors with scores above 50. The Asia-Pacific’s retail sector is performing in line with the regional average at 67, while industrial stands at 61, DTZ said.

It added that the second quarter is in complete contrast to the same period a year ago when the Asia-Pacific all-property score was half of what it is now.

The economic recovery since then has improved liquidity and demand.

‘Despite a pause in investment activity in China and Japan recently, the attractive pricing in many markets is seeing an increased number of buyers who are encouraged by occupational resilience and the resumption of rental and capital value growth,’ DTZ said.

Mainland China continues to offer good value, led by office markets in Shanghai, Beijing and Chengdu. But office space in Guangzhou and Shenzhen and retail space in Shanghai are overpriced, according to the index.

Shanghai saw a number of retail construction projects in the lead-up to this year’s World Expo. While they will sustain the sector this year, the outlook for investor returns over the medium term is expected to be subdued, DTZ said.

Meanwhile, a CBRE report yesterday said that more than half of the office rental markets in the Asia-Pacific region have either stabilised or started growing during the second quarter. Dr Raymond Torto, CBRE’s global chief economist, said the region was the driving force behind the sector’s global recovery, with over half of the markets either at the bottom of the rental cycle or in growth mode.

‘Hong Kong, Shanghai and Beijing led the region’s markets due to a push for office space from the financial sector in central business locations… Singapore, Bangalore and Mumbai followed closely as employment levels improved and prime rents and incentives remained stable.’

Source: Straits Times, 20 Aug 2010

Asia Pacific commercial properties are offering attractive returns to investors based on current pricing in global property markets.

That’s according to the Asia-Pacific all-property DTZ Fair Value Index which was launched in Asia on Thursday.

DTZ said the Index offers investors insight into the relative attractiveness of current pricing in global commercial property markets.

An Index score above 50 indicates there are more markets categorised as ‘hot’ than ‘cold’.

That means markets that are attractive to investors as expected returns exceed risk-adjusted required returns.

The Asia Pacific region hit a score of 67 in the second quarter this year which implies that commercial property markets in this region are generally offering attractive returns to investors buying into the market now.

While the office sector in Asia Pacific is leading the way with a score of 70, all three sectors are currently offering opportunities to investors with scores above 50.

The retail sector is performing in line with the regional average at 67, while industrial stands at 61.

The score is almost double what it was a year ago, implying the investment landscape has improved considerably in the last 12 months, marked by recovery in economic growth across the region, improved liquidity and occupational demand.

DTZ said the attractive pricing in many markets is seeing an increased number of buyers who are encouraged by occupational resilience and the resumption of rental and capital value growth.

Over half of the markets in Asia Pacific are categorised as ‘hot’ with the core office markets of Hong Kong, Tokyo and Singapore remaining in the top five markets in Asia Pacific.

Most mainland China markets continue to offer good value, but the Guangzhou and Shenzhen office, as well as Shanghai retail markets, are priced above fair value and therefore classified as ‘cold’.

In Australia, opportunities in offices and industrial markets are most attractive, while retail markets are also ‘warm’.

Elsewhere, the Delhi retail and Bangalore office and retail markets are the top ranked Indian markets.

Source: Channel News Asia, 19 Aug 2010

Far East submits 3 separate bids, Wing Tai and a consortium 2 each

(SINGAPORE) Ten developers and consortiums handed in 14 different bids to buy and redevelop a landmark commercial site at City Hall – with the historic Capitol Theatre, Capitol Building and Stamford House on it – by the close of the state tender yesterday.

Far East Organization submitted three separate bids while two bids were put in each by Wing Tai Holdings and a consortium made up of Perennial Real Estate, Chesham Properties and TOP Property Investment.

And one bid each was submitted by: CapitaMalls Asia and parent company CapitaLand; GuocoLand; Park Hotel Group; United Engineers; YTL Corporation; private equity fund manager GAW Capital Partners; and a consortium made up of Sin Heng Chan Group, Kim Eng Group and Japan’s Takenaka Group.

The amount of each bid was not revealed by the Urban Redevelopment Authority (URA) as the land parcel is being sold through a ‘concept and price revenue’ tender process.

Under this system, tenderers are required to submit their concept proposals and tender prices in two separate envelopes. The concept proposals will be first evaluated against a specified set of criteria and only those that meet the criteria will be considered. The site will then be awarded to the tender with the highest bid price among those with acceptable concept proposals.

Developers can therefore choose to submit multiple bids, as Far East Organization, Wing Tai Holdings and the consortium led by Perennial Real Estate have done. Perennial Real Estate is led by Pua Seck Guan, ex-CapitaLand head of retail.

The 99-year leasehold site, which is located at the junction of Stamford Road and North Bridge Road and which also comprises Capitol Centre and a subterranean parcel that will link directly to City Hall MRT station, was launched for sale in April this year.

The tender was triggered after an unnamed developer committed to bid at least $100 million – or $184 per square foot per plot ratio (psf ppr) – for it.

Analysts said then that the plot can fetch $400-$600 psf ppr.

The eventual developer of the site is required to retain and restore three ‘historically and architecturally significant buildings’ – Capitol Theatre, Capitol Building and Stamford House – for re-use. In particular, URA said that Capitol Theatre is required to be used as an arts or entertainment-related performance venue. Capitol Centre, on the other hand, can be torn down.

The winning bidder is also required to set aside 25 per cent of the total gross floor area for hotel use. This will help to strengthen the hotel cluster in the area, which now includes Swissotel The Stamford, The Fairmont and Grand Plaza Park Hotel.

The bidders will now present their concepts to a concept evaluation panel put together by URA.

Source: Business Times, 19 Aug 2010

(SINGAPORE) The Singapore office market is buzzing with leasing interest as banks and other occupiers expand their operations and plan moves to new Grade A office buildings.

Citigroup is widely tipped to be considering taking more than 200,000 sq ft at Asia Square Tower 1. The 43-storey block will have 1.26 million sq ft net lettable area (NLA) of offices when it is completed in June 2011.

At 50 Collyer Quay, Bank of America (BOA) is said to be in talks to lease about 120,000 sq ft. If a deal materialises, the leasing level in the building will cross the 50 per cent mark. 50 Collyer Quay, which will have 412,0000 sq ft NLA, is expected to be ready in Q1 next year.

Russian oil, gas and resource group Gazprom, which currently uses serviced offices in Singapore, is believed to be negotiating to rent one of the top few floors of the 43-storey Ocean Financial Centre (OFC), which will be completing next year.

OFC’s top few levels will have roof gardens.

Swiss bank Julius Baer, currently at One George Street and Harbourfront Tower 1, may also be considering taking space at a new location, possibly OFC, suggest sources.

In the Tanjong Pagar area, Goldman Sachs and Yahoo have each leased about 40,000 sq ft at Mapletree Anson, which was completed last year.

CB Richard Ellis is understood to be advising both anchor tenants that are expected to lease space at 50 Collyer Quay and Asia Square but its executive director (office services) Moray Armstrong declined to comment on specific clients the firm is representing.

Mr Armstrong was, however, willing to discuss the strength of the office leasing market in general terms.

When office demand began to pick up about a year ago, it was a game of musical chairs as occupiers cashed in on low office rents to move to new office developments.

‘However, deals in the past three months or so have been underpinned by positive headcount growth among occupiers in various sectors – including finance, insurance and professsional services,’ Mr Armstrong said.

Agreeing, Knight Frank director, business space (office) Robert MacDonald said: ‘We’re also seeing hedge funds, principally from New York, coming back to town. Law firms from the UK and US are also looking at Singapore.

‘Serviced offices are seeing very high occupancy thanks largely to new players entering Singapore. These companies will lay the foundation for office demand and help to backfill some of the space being vacated in older Grade A buildings when tenants move out to newer properties.’

On a positive note, Savills Singapore’s director (commercial) Agnes Tay points out that departures from older buildings create opportunities for remaining tenants to expand their premises within the same buildings.

Demand for office space in Singapore has recovered from a negative net take-up of about 236,000 sq ft last year to positive net demand of about 635,000 sq ft in first-half 2010. Standard Chartered Bank’s head of Asean property research Regina Lim forecasts positive demand of 1.9 million sq ft for full-year 2010. She predicts that the average monthly Grade A office rental value will end the year at about $10.20 per square foot, up 26 per cent from end-2009.

An office leasing agent says preleasing rents for Grade A buildings under construction have risen about 25-35 per cent year to date. ‘Monthly rents in new buildings are about $8.50 to $10 psf; they were $7-ish at end-2009.’

The islandwide office vacancy rate has fallen marginally from 12.5 per cent at end-Q1 2010 to 12.3 per cent at end-Q2.

DTZ executive director, business space, Cheng Siow Ying says a key challenge for office leasing agents is managing a mismatch of expectations as landlords have raised rent expectations in select buildings with high occupancies while tenants are still hoping to secure leases at competitive terms.

Citigroup, which is believed to be studying options including renting space at Asia Square Tower 1, currently operates at Millenia and Centennial towers (over 400,000 sq ft), Capital Square and Changi Business Park.

Leases on some space in Centennial Tower and Capital Square are understood to expire sometime next year. When asked if the bank was looking at new locations, its spokesman would say only that ‘from time to time, we may look for real estate options based on the expiry of leases’.

Chris Archibold, head of markets at Jones Lang LaSalle – the exclusive marketing agent representing Asia Square’s developer MGPA – said leasing interest in Tower 1 has accelerated in the past six months, with about 40 per cent of NLA under serious negotiation or let.

‘Tenant profiles are predominantly from banking and finance, professional services and consultancy practices,’ he added.

BOA, which is expected to vacate about 60,000 sq ft at Republic Plaza when its lease expires around mid-2011, is said to be considering a move to 50 Collyer Quay.

Source: Business Times, 19 Aug 2010