Category Archives: Developer News

Tanjong Pagar Centre game-changer for GuocoLand

GUOCOLAND, controlled by Malaysian tycoon Quek Leng Chan, recently completed Guoco Tower – the office component of its integrated mixed-development project, Tanjong Pagar Centre, on a 99-year leasehold site above Tanjong Pagar MRT Station.

The mainboard-listed property group has announced that 80 per cent of the 890,000 sq ft net lettable area of office space has been committed, that is either leased or subject of advanced leasing discussions. Guoco Tower obtained Temporary Occupation Permit (TOP) in September.

At the same time, part of Tanjong Pagar Centre’s 100,000 sq ft retail component also received TOP. The rest of the retail space as well as the 222-room Sofitel Singapore City Centre and a 181-unit residential component are slated to receive TOP in stages from late this year to early next year. The retail component is more than 80 per cent committed.

Office and retail tenants have started to move in.

The mixed-development project has an estimated gross development value of S$3.2 billion. GuocoLand paid S$1.708 billion or S$1,006 per square foot of potential gross floor area for the Tanjong Pagar Centre site, which it clinched at an Urban Redevelopment Authority tender in 2010.

Now, Tanjong Pagar Centre is set to transform GuocoLand, significantly boosting its recurring income base. The Business Times’ back-of- the-envelope calculation shows that when the asset is fully operational and has stabilised, it could generate Ebitda (earnings before interest, tax depreciation and amortisation) of around S$93 million per year.

This assumes that the office and retail components have been fully leased at average gross effective monthly rentals of S$9 per square foot for the offices and S$15 psf for the retail space; it also assumes that the hotel commands an average room rate of S$400 per night with 80 per cent average occupancy.

GuocoLand owns 80 per cent of Tanjong Pagar Centre – the Employees Provident Fund of Malaysia holds the balance 20 per cent stake – so GuocoLand would stand to receive an annual Ebitda boost of about S$75 million for its attributable share of Tanjong Pagar Centre.

This will help augment GuocoLand’s pool of recurring income, which currently is pretty small – from sources such as the 20 Collyer Quay office block in Singapore, a few hotels in Shanghai and Malaysia, and a small mall within the Guoson Centre mixed-development in Shanghai.

Once Tanjong Pagar Centre is stabilised, this huge leap in recurring income from the office, retail and hotel components will not only provide ballast to GuocoLand’s earnings, but will also smoothen the volatility in income from property development. As well, the stable cashflow will enhance the group’s resilience and enable it to seize growth opportunities.

Besides anchoring the group’s ambitions of building a strong base of recurring income, Tanjong Pagar Centre will generate property development income from the sale of apartments in the 181-unit Wallich Residence, sitting atop the offices in a 64-storey tower.

Apartments start from level 40, at a height of about 190 metres. So far 16 have been sold – all at above S$3,000 psf. The group will likely launch a fresh marketing campaign when the residential component has been completed around early 2017, to give potential buyers a sense of the views they will enjoy from the height.

Wallich Residence’s 21,108 sq ft super penthouse on the top three levels of the 64-storey tower reaches a height of 290 metres – making it Singapore’s tallest residence.

Through these upmarket residences in the CBD, Tanjong Pagar Centre will reinforce another strategy GuocoLand has been building on in recent years – that of focusing on the high-end residential market.

In Bukit Timah, the group is left with just a three-bedroom penthouse at the 210-unit Goodwood Residence.

At another freehold completed project, the 381-unit Leedon Residence, GuocoLand is left with 109 units. The average price achieved so far is just below S$2,000 psf and the group could be mulling over a bulk sale. The group’s next high-end residential project here will be a 450-unit condo in Martin Place on a site clinched a few months ago.

GuocoLand could tap a modest revival in investment interest in Singapore’s high-end housing market, which took a more severe beating compared to other segments in the initial stages of the current residential downcycle.

In addition to Tanjong Pagar Centre, other drivers of recurring income could be in the offing for GuocoLand. Its Bursa Malaysia-listed subsidiary, GuocoLand Malaysia, is developing Damansara City in Kuala Lumpur. The project is expected to be operational in 2017 and GuocoLand Malaysia has retained within the development an office tower, a hotel and retail mall for recurring income. In the medium term, Singapore-listed GuocoLand itself could develop future phases of its Guoson Centre commercial site in Shanghai and retain them for rental income.

GuocoLand does seem to have some good things going for it. That said, it does not receive much coverage from stockbroking houses, principally because the stock is relatively illiquid. With Mr Quek controlling about 70 per cent of the company, the group has a small free float of about 21 per cent. The average daily volume for the counter over the past one year is 231,000 shares. This may be small for institutional following but could still be comfortable for some smaller funds and retail investors.

GuocoLand’s market cap is S$2.3 billion. As at Sept 30, 2016, its gearing was 0.9 times.

Rumours periodically surface that Mr Quek could take the company private to take advantage of the discount at which it is trading.

Based on Tuesday’s closing price of S$1.915, GuocoLand is trading at 44.5 per cent discount to CIMB analysts Lock Mun Yee and Yeo Zhi Bin’s S$3.45 estimated revalued net asset value per share for the counter.

Perennial Real Estate seeks to wind up Capitol entities over deadlock with Pontiac Land

PERENNIAL Real Estate Holdings (PREHL) has filed applications for the Singapore High Court to wind up three associated companies related to its integrated development, Capitol Singapore at City Hall, due to a deadlock with its partner.

The three firms are Capitol Investment Holdings, Capitol Retail Management and Capitol Hotel Management.

The applications were made because “the shareholders and management of the Capitol entities are in deadlock, and that their relationship has been adversely affected such that the shareholders cannot realistically continue to work together constructively,” it said in a filing to the Singapore Exchange.

PREHL said on Thursday that the shareholders were unable to agree on a number of key issues related to the project in the last few months. It did not say what these issues were.

“The prevailing state of affairs is not conducive to the business interests of the Capitol project, the Capitol entities or their respective shareholders. It is therefore necessary for the shareholders to disengage from the joint enterprise, such that the Capitol project is ultimately fully controlled by either shareholder, or by a third party buyer,” PREHL said.

The Capitol entities together hold the assets of Capitol Singapore, an integrated development at the junction of Stamford Road and North Bridge Road.

PREHL owns an effective 50 per cent stake in each of the three Capitol entities. Its chief executive officer is retail mall veteran, Pua Seck Guan.

Chesham Properties holds the remaining 50 per cent. Chesham is a member of the Kwee family’s Pontiac Land Group, a privately-held luxury property developer

All components of the integrated development – retail, theatre, hotel and residences – have received their temporary occupancy permits.

PREHL said the winding up proceedings were not expected to have any material impact on its net tangible assets or earnings per share for the current financial year ending December 31, 2016.

CapitaLand latest to enter co-working space arena

THE concept of co-working space is gaining traction with office landlords here, with CapitaLand being the latest to introduce this in its headquarters building.

CapitaLand is partnering co-working space operator Collective Works under a 50-50 joint venture to turn the entire 12th floor at Capital Tower into co-working space. Spanning some 22,000 square feet, this can potentially house up to 250 companies.

Collective Works will manage the co-working space on behalf of the JV.

When asked about the rent, a CapitaLand spokeswoman said the JV leases the space at Capital Tower from the landlord CapitaLand Commercial Trust (CCT) at “market rent”.

Estimates of Grade-A office rents in Tanjong Pagar by property consultants range from S$8 to S$8.50 per square foot (psf) per month. The average rent of remaining leases expiring at Capital Tower disclosed by CCT was S$9.15 psf per month in the fourth quarter of 2015.

The 12th floor of Capital Tower was previously occupied by Japan’s Mizuho Bank, which vacated three floors from level 11 to 13 late last year, when it moved to Asia Square Tower 2 where it took up 120,000 sq ft of space. The 11th and 13th floors at Capital Tower have been subdivided and largely leased out to new tenants.

CapitaLand Singapore CEO Wen Khai Meng said the group is confident the co-working space at Capital Tower “will appeal to a range of fast-growing businesses, entrepreneurs and freelancers seeking to rent fully functional, fitted-out office spaces under flexible lease terms” given its central location, connectivity to public transport, Grade-A specifications and amenities. “We foresee demand coming from sectors such as fin-tech, social media, technology, insurance, corporate training and venture capital investment,” he added.

Collective Works, the brainchild of entrepreneur Jonathan O’Byrne, launched its first co-working space in the Central Business District (CBD) back in December 2012 at 100 Cecil Street. “We have received pre-registration for more than 40 per cent of the space at Collective Works Capital Tower, prior to our announcement of the new location to press and clients,” Mr O’Byrne said.

Unlike serviced offices that rent out private rooms, co-working space operators charge a monthly membership fee for the use of hot-desking, designated work stations and shared facilities. According to Collective Works’ website, a hot-desking workspace starts from S$240 per month.

The co-working phenomenon which began in the United States has swept across other gateway cities such as London, Berlin and Paris, followed by South-east Asian countries such as Indonesia, Philippines, Malaysia, Thailand and Singapore.

CapitaLand said research on the office market has revealed there is emerging interest among operators and customers for quality co-working spaces in the CBD.

Mr O’Byrne also noted that co-working currently represents just 10 per cent of the serviced office space in Singapore. “But with 30 per cent of the workforce predicted to work in small businesses by 2020, co-working could easily equal if not surpass the serviced office market in scale.”

In Singapore, co-working is at a fairly nascent stage. Of the nearly 40 co-working offices islandwide, 80 per cent are located outside the CBD. With over 3.5 million sq ft of total known CBD office supply coming onstream this year, operators are expanding into more centralised locations.

Global workspace provider Regus is taking up half of the 14th floor in the upcoming Guoco Tower in Tanjong Pagar, which will have both co-working space and serviced offices. Homegrown company JustGroup now operates co-working spaces at two locations – 120 Robinson Road and 6 Raffles Quay – totalling 50,000 sq ft and serviced offices spanning 150,000 sq ft in five locations.

OUE had said it plans to set aside some 15 per cent of retail net lettable space in its upcoming mall Downtown Gallery for co-working space. Keppel Land also carved out some 6,400 sq ft on the fourth level of Keppel Towers offering both serviced office and co-working spaces under its business venture Workspace.

Talk in the market is that Lend Lease might introduce co-working space at its upcoming mixed-use project Paya Lebar Central, which is jointly developed with the Abu Dhabi Investment Authority.

A recent Bloomberg report said American firm WeWork is preparing to form a global venture with Australian property group Lendlease to lease office space and apartments to companies in Europe, North America and the Asia-Pacific.