MAPLETREE Logistics Trust has signed a binding memorandum of understanding (MOU) with Kabushiki Kaisha A-Max to acquire three properties in Japan, its manager Mapletree Logistics Trust Management (MLTM) said yesterday.

The properties are the Iwatsuki Logistics Centre, a distribution centre and office in Iwatsuki, with a gross floor area (GFA) of 30,000 sq m; the Iruma Logistics Centre, a distribution centre and office in Iruma, with GFA of 26,000 sq m, and Noda Logistics Centre, a distribution centre and office in Noda, with GFA of 36,000 sq m. All the locations are in Saitama Prefecture, which is Toyko’s northern neighbour.

The properties will be acquired for a total of 13 billion yen, (about S$200 million). The vendor, A-Max, is a logistics facilities development and management company.

The acquisition is the sixth announced by Mapletree since December last year, totalling $430 million.

With the completion of all of these acquisitions, MapletreeLog will have a portfolio value of about $3.3 billion.

MLTM said the latest acquisition will have significant benefits arising from attractive net property income (NPI) yield and distribution per unit accretion. The properties are also 100 per cent leased for eight to 10 years, providing stable rental income, and are in good locations.

‘Given the low interest rates in Japan, it is likely that this acquisition will be funded predominantly by debt,’ said MLTM. ‘Any proceeds from equity issuance will likely be applied towards other acquisitions or refinancing of other more expensive debt in the portfolio to maintain a gearing below 45 per cent.’

MLTM chief executive Richard Lai said: ‘Japan’s logistics market remains attractive to us because it has breadth and depth that is currently unmatched elsewhere in Asia. We will continue to expand our portfolio in Japan by selectively acquiring yield-accretive logistics assets of good quality and location. We also seek to enhance the quality of our income stream through addition of good-quality customers to our diversified customer base. We will continue to focus on such accretive third-party acquisitions as a key strategy to grow our portfolio, and in turn, the returns to our unit-holders.’

Source: Business Times, 29 Jul 2010

A TENDER for a large high-rise commercial site in the 200ha innovation and research hub one-north has attracted just two bidders.

Ho Bee Developments put in the top bid of $410.99 million or $342.20 per sq ft per plot ratio (psf ppr).

That is about 7 per cent above the second highest bid of $384 million or $319.80 psf ppr from Mapletree Trustee.

Ho Bee’s general manager of marketing and business development, Mr Chong Hock Chang, said its plan is to rent out the office units for recurring income, and it is looking at achieving office rents of $5 psf.

‘We believe we can build an iconic building on this landmark site,’ he said.

The 99-year leasehold site has been on the Government’s reserve list of sites since April 2008. A tender was finally triggered in May when Mapletree committed to a minimum bid of $320 million, or $266 psf ppr, which the Government found acceptable.

The site of about 1.8ha is located at the junction of North Buona Vista Road and Commonwealth Avenue West and is near the Buona Vista MRT station. It has a

potential yield of 111,565 sq m, with 2,000 sq m being set aside for retail use.

JTC said the building will provide office space outside the Central Business District for the business support companies of the research institutes at one-north.

Cushman & Wakefield managing director Donald Han said the bids were within the expected range.

The low level of interest is due to the huge price sum involved, he added.

Also, ‘as an office product, it is untested in the area, which is predominantly industrial in nature’, he said.

CBRE Research said the development cost for a predominantly office tower is about $900 psf, based on the top bid.

Just under 1 million sq ft of net lettable area of commercial space could be developed on this parcel, said its executive director Li Hiaw Ho.

‘This would facilitate the expansion of research and development functions at one-north and serve as an alternative source of office supply post-2013 in the Buona Vista sub-regional centre,’ he said.

Mr Han said current rents in the area are about $3.80 psf to $4.50 psf.

As office rents have bottomed out in the second quarter, they are expected to rise in time. ‘The rental yield would therefore be in excess of 5 per cent,’ said Mr Han.

Source: Straits Times, 28 Jul 2010

HO Bee Investment is planning to invest about $1 billion to develop a commercial project at North Buona Vista Drive.

The company told BT this after it submitted the top bid for a 99-year leasehold commercial plot located in the one-north research area yesterday.

The tender for the 1.8 hectare site attracted two bids. Ho Bee’s was $410.99 million, which works out to $342 per sq ft per plot ration (psf ppr).

The second bid came from Mapletree Investments, at $384 million or $320 psf ppr.

The site has a maximum allowable gross floor area (GFA) of 1.2 million sq ft. Ho Bee hopes to set aside some 1-2 per cent of space in the commercial development for retail shops. It is also exploring the possibility of having service apartments within the development.

The site has a good size for creating ‘a landmark building in a very attractive location’, Ho Bee said. It plans to lease the development out for recurring income when it is ready in about four years’ time.

Market watchers had expected demand for the site to be lukewarm given its large size, which would involve a huge capital commitment.

But the site has other attractions: it is near Buona Vista MRT Station and lies within a growing research cluster for the biomedical, infocommunication and media industries.

CB Richard Ellis Research executive director Li Hiaw Ho believes the site can yield a net lettable commercial area of just under a million sq ft. ‘This would facilitate the expansion of R&D functions at one-north and serve as an alternative source of office supply post- 2013 in the Buona Vista sub-regional centre.’

Sentiment in the commercial property market has picked up of late. Official figures show that office rents increased 1.1 per cent in the second quarter from a quarter ago. Prices of office space climbed 4.6 per cent.

There was also a net increase of 398,264 sq ft in office space demand in the second quarter.

Source: Business Times, 28 Jul 2010

MAPLETREE Investments, the property unit of Singapore’s Temasek Holdings, is poised to list a real estate investment trust (Reit) in Singapore that could hold up to S$4 billion in assets, a top executive said.

CEO Hiew Yoon Khong said yesterday the listing of the Reit would take place when stock-market conditions improved.

‘The management team is ready, and the filing process is really a two-month job,’ Mr Hiew told Reuters in an interview. ‘We were actually preparing for the IPO 16 to 18 months ago but the market turned.’

He said Mapletree planned to launch a Vietnam property fund and an Asian industrial property fund in the next 12 months and hopes to raise between US$500 million and US$1 billion for each.

Mr Hiew, who is also senior managing director (special projects) at Temasek, said Mapletree’s strategy going forward is to become ‘a real estate capital management type of business’, managing listed and unlisted funds for outside investors. He said over the next three to five years, Mapletree hoped to grow its property assets to at least S$20 billion.

Mapletree currently owns or manages nearly S$12 billion in real estate assets in several Asian countries, including China, Vietnam and Malaysia.

Its listed property funds include Lippo-Mapletree Indonesia Retail Trust, which owns malls in Indonesia, and Mapletree Logistics Trust, which invests in warehouses and distribution centres across Asia.

Mr Hiew said the proposed Mapletree Commercial Trust that the firm will list in Singapore would comprise VivoCity, Singapore’s largest mall, as well as nearby properties to the west of the central business district.

These include PSA Building, which houses the country’s port operator, and St James Power Station, a popular nightspot.

Mapletree will likely launch the initial public offering when yields on Reits fall closer to 5 per cent – which is around the historical level – from around 8 per cent currently, he said.

Turning to the property funds in Mapletree’s pipeline, Mr Hiew said the Vietnam fund would invest mostly in office, retail and residential properties.

The industrial fund would likely be pan-Asian, although Mapletree may organise it into sub-funds that focused on investments in Japan, China and other parts of the region.

Mr Hiew said he was confident Mapletree’s various property funds would achieve their target returns, which range from 12 per cent for a Singapore industrial fund to 18-22 per cent for the India-China fund. ‘It’s still in the early stage but so far on track. There’s nothing in the numbers to make us panic.’ – Reuters

Source: Business Times, 12 Sep 2009

Cyclical rental fluctuations are much less volatile compared to those for offices

MUCH has been written about the global economic downturn in terms of the financial industry, the impact on non-financial industries and the knock-on effect on occupier demand across the globe.

While this forms the backdrop to this article, we will be discussing Jones Lang LaSalle’s (JLL) view on the likely impact on business park and high-tech occupancy rates and rental trends over both the short term (next one to two years) and the long term (next five to 10 years).

Looking into the future: Artist’s impression of Mapletree Business City, one of the major upcoming developments. The current high-tech/business park supply pipeline shows 7.9 million sq ft of space over the next four years.

Over the past four years, Singapore has seen rapid growth on a number of fronts; the financial services sector and its supporting industries, professional services, multinational corporations and small and medium enterprises (SME). The most startling of this growth is in the financial services sector. This is a result of Singapore’s efforts to reposition itself as a financial hub. The growth of the financial services sector has been in both front office and back office functions.

The share of office space usage of Grade A CBD Core buildings by financial services companies has risen from 37 per cent to 46 per cent between 2004 and 2008.

Similarly, the growth in the financial services back office function is evidenced by the recent acquisitions of significant chunks of business park space by Citi, Standard Chartered Bank, DBS Bank and HSBC over the last 24 months.

Post Sept 15, the economic environment has changed fundamentally across the globe and hence, we are unlikely to see growth in short-term occupier demand whether it be financial services industry or others.

Current market trends show that we are now in negative growth and many occupiers are surrendering space.

The current high-tech/business park supply pipeline shows 7.9 million sq ft of space over the next four years. The major developments include Mapletree Business City (1.3 million sq ft), Icon @ International Business Park (386,000 sq ft) and Ascendas-Frasers Centrepoint development at Plots 61-63 (645,000 sq ft) at Changi Business Park.

With significant new pure office supply coming on-stream islandwide between 2009 and 2012 (about 9.7 million sq ft), the office market is becoming increasingly competitive with landlords reducing rents to attract tenants. The anticipated effect on high-tech/business park space will be that there will be less spillover of occupier demand from a point of view of both availability of pure office space and reduced rental differentiation.

At the peak of the market in 3Q 2008, average Raffles Place Grade A rents stood at $18.40 per square foot a month whereas high-tech rents stood at $4.25 psf a month. This is a differential of $14.15 psf. Based on this, the financial driver behind much of the back office operation is compelling. As rents in the CBD decline, this differential will reduce.

The office market bottomed out in the second half of 2004 and saw a rental rise of 23 per cent in 2005, followed by a 63 per cent jump in 2006 and a further 67 per cent surge in 2007, peaking Q3 2008 at $18.40 psf a month. However, with the rapid acceleration of the financial crisis and a global recession currently being experienced, 4Q 2008 saw demand drop off and the overall y-o-y rental growth was reduced to 7 per cent given a Q4 2008 rental of $14.95 psf a month.

The high-tech sector also saw rent increases of 13 per cent, 11 per cent and 98 per cent in 2005, 2006 and 2007 respectively. The high-tech market correlated with the office market in 2008 as rents also fell in the last quarter of 2008 to an overall correction of 5 per cent. While 2007 saw a virtual doubling of high-tech rents, the increases from the bottom of the market till today has nowhere been as dramatic as the office market which has trebled.

We have a scenario today where there is still a significant gap between office and high-tech rents. To put that in perspective, average Raffles Place Grade A office rents are currently tracking $14.95 psf. while average high-tech rents are currently commanding $3.75 psf. That difference in rents is still compelling but with rents for both the office and high-tech market expected to ease in line with the economic slowdown and significant new supply coming on stream in both markets, especially within the CBD, we should expect the gap to narrow. This, as office rents fall at a faster clip compared with the high-tech sector.

Over the last three years, the landscape of the high-tech/business park space in Singapore has changed dramatically. This comes about with the significant developments in Changi Business Park, one-north in Buona Vista as well the establishment of Alexandra as a high-tech hub with a proposed new development known as Mapletree Business City. There have also been a number of high quality high-tech buildings developed in various locations across Singapore.

Our view is that the long-term outlook for high-tech/business park space remains a positive story even if it is challenging in the near term. The reason for this view is based on a number of factors.
Once the economic downturn is over, Singapore is well-positioned to continue its growth as a financial services hub and this will include back office growth which is likely to be located in business park space.

Business park space is much less volatile in terms of cyclical rental fluctuations. This can be seen in the trough to peak rents for both segments: The most recent office market cycle saw rents rise from $4.80 to $18.40 psf a month whereas high-tech rents over the same period went from $1.60 to $4.25 psf a month.

Given that most back office functions are not directly revenue generating, they cannot contend with such a widely ranging impact on their cost base. A front office operation would generally have increased revenue that would counteract the impact of increased rent.

Another key point to note is that a number of the business parks are now reaching critical mass in terms of the number of employees working in the parks to support much needed local infrastructure, such as retail amenities. The lack of amenities had been a major criticism of business parks in previous years.

Finally, our house view is that there will always be a compelling cost advantage argument for business park space when viewed on a long-term basis, ie, 10-15 years or two to three property cycles.

Chris Archibold is regional director and head of markets, Singapore, Jones Lang LaSalle; and Tahlil Khan is associate director of markets, Singapore, Jones Lang LaSalle

Source: Business Times, 26 Mar 2009

Modest cuts possible for ex-JTC tenants if economy worsens

MAPLETREE Investments said yesterday it might consider modest rental cuts for aggrieved industrial tenants at its ex-JTC properties – if economic conditions deteriorate further.

Many tenants have petitioned Mapletree, a Temasek Holdings unit, for hefty rent cuts to help them cope with tough market conditions.

They are also upset to have missed out on a 15per cent rental rebate granted by JTC Corp as part of the Government’s Resilience Package.

This is because the rebate was granted after JTC sold $1.7billion worth of its flatted factories, stack-up buildings and ready-built assets to Mapletree last July.

These properties are now held by Mapletree Industrial Trust (MIT), a private Reit that is 30.5per cent owned by Mapletree and the rest held by other investors such as Arcapita.

One MIT tenant who has rented his ex-JTC factory space in Lorong Bakar Batu for 22 years, Mr Foong Khai Leong, told The Straits Times: ‘The rents keep going up, business is going down…and now the Government is giving a rental rebate to tenants of JTC…I not only cannot enjoy the rebate, I may now have to cough up more when I renew my lease.

‘If we don’t fight for lower rents, we will have little choice but to fold up the business. Who’s going to pity us?’ said the managing director of May Tat Plastics.

MIT said it will not be cutting rents for now, even as the downturn hits small and medium-sized enterprises (SMEs). ‘We are also similarly impacted,’ said Mapletree Investments chief executive Hiew Yoon Khong. He said a 15per cent rental cut was definitely out as it could trigger a loan default for MIT. ‘In this environment, we can’t take that kind of risk.’

However, a smaller rent cut could happen. ‘If the environment continues to deteriorate, we will consider it,’ said Mr Hiew.

Some observers are sympathetic to the tenants’ plight. ‘It’s quite unfortunate. The timing is bad as just several months ago, they were JTC tenants,’ said Colliers International director of industrial sales Tan Boon Leong.

Many of MIT’s tenants will likely be affected as they are SMEs occupying the cheapest of the ex-JTC factories. JTC rents are generally below market rates, said Mr Tan.

But, they need to change their mindsets. ‘They cannot expect the landlord to give them the full rebate because this landlord also has to account to shareholders,’ said Mr Tan.

MIT’s financing burden has risen as it requires an additional capital top-up of $140million. Its interest costs have almost doubled; it faces stricter loan convenants and it has had to defer cash distributions.

Mapletree Investments’ CEO (Industrial) Phua Kok Kim said: ‘If we have difficulty filling the space at the new rents, then naturally rents will come down.’ The new rents are the rates MIT is charging for 70 new non-business park space tenants so far and they are all above the renewed rates of ex-JTC tenants.

Mapletree said the 1,448 tenants of MIT’s flatted and stack-up factories, as well as warehouses, all benefit from a 5per cent rental cap – of JTC’s rent on July 2007 – when they renew their leases before July next year.

There is no cap for the remaining 108 – or 7per cent of – tenants in its business park buildings. Mapletree said it is doing what it can on a case-by-case basis. It has arranged instalment plans for 18 firms to help them settle arrears, for instance.

Source: Straits Times, 14 Mar 2009