Manulife said to be doing due diligence on PWC Building

PWC Building at 8 Cross Street could be in the early stages of a potential sale.

BT understands that insurer Manulife has been selected to do exclusive due diligence for the purchase of the 28-storey building, which has a net lettable area (NLA) of 355,704 sq ft.

PWC Building, which is owned by DBS, is on a site with a balance lease term of 78.5 years.

The price is expected to be more than S$700 million. According to information in DBS’s 2015 annual report, PWC Building was independently valued at S$711 million at the end of last year; this works out to S$1,999 psf on NLA.

Talk in the market is that Manulife was selected to do due diligence following a private expression of interest exercise conducted on behalf of DBS. When contacted on Thursday, a spokeswoman for the bank declined to comment.

Manulife did not respond to BT’s queries by press time but sources say it is looking at a part occupation/part investment strategy for the building, which is at the corner of Cross and Telok Ayer streets.

Manulife operates at a few locations on the island, but principally at Manulife Centre at Bras Basah Road.

Analysts say the Canadian insurer is keen to boost its physical presence in Singapore’s financial district – in sync with the increased market share it is eyeing in Singapore following its 15-year exclusive bancassurance partnership with DBS which kicked in on Jan 1 this year.

What makes PWC Building a good acquisition for Manulife is that close to half of the building will be vacated when anchor tenant PricewaterhouseCoopers (PwC) moves to Marina One, where it has signed a lease for around 180,000 sq ft.

Manulife is said to occupy around 90,000 sq ft at Manulife Centre and its lease runs out in late-2017. Manulife Financial Advisers operates out of VisionCrest Commercial. Some of the group’s agencies are located elsewhere including Kallang.

Moving into 8 Cross Street would help Manulife keep up with the competition, who all have visibility in the financial district.

Prudential is just a stone’s throw away at its namesake tower (although it will be moving to Marina One); AIA Tower along Robinson Road is also nearby.

NTUC Income reaps great brand-presence through its ownership of Income at Raffles at 16 Collyer Quay – although its headquarters are at Income Centre at 75 Bras Basah Road, near Manulife’s headquarters.

Market watchers note that the Canadian insurer used to have a limited market share in Singapore before strengthening its multi-distribution strategy through a bancassurance deal with DBS starting this year.

Under the agreement, Manulife pays DBS S$1.6 billion over 15 years in exchange for letting it sell life and health insurance products to the bank’s more than 6 million retail, wealth and SME customers in Singapore, Hong Kong, China and Indonesia.

Singapore office rents are soft but offices have posted a stellar performance on the investment sales scene this year.

Based on Savills’ database, the tally for office deals originating from the private sector stands at S$7.3 billion, up from S$4.9 billion in 2015.

The major deals this year include Qatar Investment Authority’s acquisition of Asia Square Tower 1 (S$3.38 billion), CapitaLand Commercial Trust’s purchase of the remaining 60 per cent stake in CapitaGreen (S$960 million) and Indonesian tycoon and philanthropist Tahir’s purchase of Straits Trading Building in Battery Road for S$560 million (to be completed later this month).

Other sizeable deals include the S$530.8 million acquisition of 77 Robinson Road by CLSA Capital Partners and the sale of the office tower at Mapletree Business City Phase 1 (S$471.9 million).

Alpha Investment Partners recently sold its half stake in Capital Square to ARA Asset Management for S$475.5 million (the deal values the entire building at S$951 million or S$2,450 psf).

Meanwhile, interest could have fizzled out at One George Street, where China Life Insurance and Haitong Securities were earlier carrying out due diligence.

PWC Building was developed jointly by DBS and the former DBS Land (which later merged with Pidemco Land to form CapitaLand).

DBS bagged the 99-year leasehold site for S$367.31 million or S$800 per square foot per plot ratio at an Urban Redevelopment Authority tender that closed in January 1996.

It later teamed up with DBS Land to develop the site through a 70:30 tie-up; the total development cost was estimated at S$1,500 psf.

Last year, CapitaLand divested its 30 per cent stake in the the company that owns PWC Building to DBS.

According to a stockbroking house report at the time, the deal priced the property at close to S$1,892 psf.

The building had 97 per cent committed occupancy at the time.

Tech unicorn makes rainbow connection at co-working space here

A TECH unicorn with about 100 staff will take up space at a new co-working office in Singapore’s Central Business District area in early 2017.

The Working Capitol said on Monday it would offer about 55,000 square feet across 11 floors at 140 Robinson Road to businesses across various industries. It said initial members of The Working Capitol on Robinson Road include a fintech (financial technology) lab by RHB Bank and a 100-person tech unicorn situated across an entire floor. It did not identify the tech company, with a unicorn referring to a private tech company that is valued at at least a billion dollars.

The Working Capitol has an existing 40,000-square-foot office space in Chinatown, which houses more than 70 companies, including startups, small and medium enterprises, and large global organisations.

90% of retail space at upcoming Bukit Panjang mall taken up

Retail space is filling up at Bukit Panjang’s upcoming shopping centre called Hillion Mall, announced Sim Lian Group on Friday (Nov 25).

It said in a press release that 90 percent of the approximately 174,730 sq ft of lettable area has been taken up by about 100 retail as well as food and beverage (F&B) tenants.

There are five anchor tenants – NTUC FairPrice, PCF Sparkletots Preschool, Amore Fitness and Boutique Spa, Kopitiam and Best Denki.

The mall along Petir Road, which is slated to open in the first quarter of 2017, is part of Bukit Panjang’s upcoming integrated transport hub. The Land Transport Authority (LTA) had announced that the hub will seamlessly connect the existing Bukit Panjang LRT station and the future Bukit Panjang MRT station with retail, F&B and residential developments at the same site.

Basement 2 of Hillion Mall will be directly linked to the MRT station via an underpass, said Sim Lian Group.

Above the mall is the 546-unit Hillion Residences. It is expected to receive its Temporary Occupation Permit (TOP) by September 2018.

This is Sim Lian Group’s first mixed-use development in Singapore. When complete, the mall will serve more than 220,000 residents and 760,000 commuters, it said.

Source: Channel NewsAsia – 25 Nov 2016

Pegging office space investment to high vacancy periods

THE Singapore real estate market has been volatile. Amid the cyclical nature of the market, we looked at data from 2000 to find the best years to buy an office building in Singapore and hold for five years. We found that these periods have generally coincided with periods of high vacancy rates.

In 2001 to 2004 prime office rents fell 42 per cent, before rising 270 per cent in 2005 to 2007, then correcting downwards by 52 per cent in 2008 to 2009. In the last two years, prime office rents fell 18 per cent and JLL expects rents to fall another 10 per cent before recovering in 2017.

Due to the market’s cyclical nature, investment in Singapore office assets at the right time can provide rich returns. In 2002 to 2005, an investor who bought an office building and sold it after five years would have made an average annual return of 18 per cent. In 2009 to 1H2010, an investor doing the same would make an average annual return of 11 per cent.

Based on the current supply pipeline, JLL expects the CBD office vacancy rate to rise to 12.5 per cent in 2017 and stay at around 12.1 per cent in 2018, potentially presenting an opportune time to invest in office assets. Another way to time the market is based on market yield spreads. Counter-intuitively, it has historically been better to buy assets when market yield spreads are narrower, as these coincide with periods of high vacancies and rental declines.

In 2002 to 2004, when vacancy rates were high and rents fell, the spread between prime office yields and 10-year bond yield ranged from 100 bps (basis point) to 140 bps. When the rents recovered, this spread widened to 250bps in 2005-2008. In 2009-1H2010, when the spread narrowed again to 185 bps, it was again a good time to invest in office assets.

In the last two years, the yield spread has narrowed again to 150bps. This may seem tight, but is likely due to the 18 per cent decline in office rents over the period. When occupancy and rents recover over the next five years, it is likely that capital values would follow the same trend.

Structurally, we are also positive about Singapore’s office market outlook. Singapore is situated in the fast-growing South-east Asia region. South-east Asian economies are forecast to grow at 5 per cent annually till 2020, exceeding global growth of 3.5 per cent.

The strongest growth countries are potentially: Vietnam, Philippines and Indonesia. Their growth will support Singapore’s exportable services and enhance the city’s value proposition as a gateway of South-east Asia.

Between 2010 and 2014, Singapore’s services exports recorded robust growth of 8.6 per cent CAGR (compound annual growth rate). Despite the global slowdown in trade in 2015, export growth in Singapore’s financial services, telecommunications, computer and information services sectors stayed resilient. In 2016 to 2020, we expect these exportable services to continue to grow given the rise of the middle class and increased urbanisation in South-east Asia.

Toys “R” Us plans to open 2 more stores in Singapore

Unfazed by the sluggish local retail conditions, Toys “R” Us is expanding its foothold in Singapore, with plans to unveil two more stores in the coming months.

One will be slated for opening before Christmas and another by early-2017, country manager Raymond Burt told Channel NewsAsia on Wednesday (Nov 2) at the launch of its newly-refurbished flagship store at VivoCity. That will bring the number of stores the American toy retailer has in Singapore to 11.

With the new stores, there will be around 60 positions to be filled, including full-time and part-time sales positions, as well as management-level posts, added Mr Burt who oversees Toys “R” Us operations in Singapore and Brunei.

However, he declined to reveal further details about the location and size of the new stores, as well as the amount which Toys “R” Us is investing. Channel NewsAsia understands that the VivoCity store, which is 30,000 square feet, will remain the retailer’s biggest store in Singapore.

According to APAC president Andre Javes, the company, which first ventured into Singapore in 1984, has “no issues” in putting in further investments in the local market despite a deteriorating retail outlook and growing concerns over the economy.

“We will continue to grow here as we still see Singapore as a growth market,” Mr Javes, who is usually based in Hong Kong, said. “We don’t want to make decisions just based on the current economic situation which is tough… but this market has been a good one for the past 32 years and we have no issues investing more.”

In fact, Mr Javes said he is “quite optimistic” about sales over the coming years, citing the release of new Hollywood blockbuster movies that will likely add additional push in toy sales.

In addition, the toy market is usually “recession-proof” with demand for certain categories such as educational toys holding up, especially during festive seasons like Christmas, he added.

STAYING IN THE GAME

In its home market, the conventional retail chain has come under pressure from other retailers, such as Wal-Mart, that sell toys, as well as the rise of online platforms including Amazon. A sign of its struggles, Toys “R” Us shuttered its iconic 110,000 square feet flagship store at Times Square in New York last year.

In Singapore where e-commerce has rapidly taken off and given other retailers a run for their money, Mr Burt told Channel NewsAsia that Toys “R” Us has seen less of an impact thus far. Nonetheless, it is stepping up its game by rejuvenating its store experiences with interactive setups and attention-grabbing displays.

Its stores at VivoCity and Paragon have an interactive wall which allows customers to browse through product catalogues or take a photo with. At the revamped VivoCity store, an experiential area comes with three digital screens showing videos about the latest toys. The LEGO section, which is the largest across all Toys “R” Us stores in Southeast Asia, has multiple tables for children to play around.

Meanwhile, it also has an e-shopping platform and offers delivery services for online purchases.

“While we haven’t noticed much (impact), it’s something that has made us challenge our own model… we have to evolve to this new environment,” Mr Burt said. “Over the years, we have stepped up on the activities for interaction in our stores so this is one of our key recipes to success in this omni-channel world. Meanwhile, (online) is part of our business, rather than a new competitor.”

Beyond Singapore, Mr Javes told Channel NewsAsia that there is no slowing down in expansion plans either, with China, Australia and Japan as the company’s key focus.

“In the Greater China region and Southeast Asia, we will be opening around 43 stores this year and we will continue on this path in 2017,” he said.

But Toys “R” Us is taking on a different strategy in this part of the world. Instead of sprawling stores, the trick to success in Asia lies more in the store’s location given the differences in consumer activities.

“In our traditional Western markets, we usually have standalone stores that are double the size of this one in VivoCity where people can drive to on the weekends. But in Asia, we are looking at smaller stores at more convenient locations such as malls where people usually visit on the weekends,” Mr Javes said.

Source : Channel NewsAsia – 2 Nov 2016

John Little to close its last outlet by end December

Department store John Little will close its last remaining outlet at Plaza Singapura by the end of December this year, the Robinsons Group announced in a statement on Saturday (Nov 5).

The decision was made after evaluating the relevancy and sustainability of its brick-and-mortar business, said the Robinsons Group, adding that John Little will instead evolve as a brand into a pop-up format, which it will unveil next year.

“This closure is part of the consolidation efforts to focus on businesses that are growing within the Robinsons Group, while rechannelling our resources to bring in new brands and shopping concepts to excite the retail industry,” the group said.

Affected staff members have been briefed and they will be deployed to “other suitable businesses” within the organisation, it added.

The group, which is owned by the Dubai-headquartered Al-Futtaim Group, also manages Robinsons and Marks and Spencer.

Source : Channel NewsAsia – 5 Nov 2016

FCT buys Yishun 10 cinema complex retail units for S$37.7m

SHOPPING-MALL owner Frasers Centrepoint Trust (FCT) has inked deals to buy all 10 strata-titled retail units at the Yishun 10 cinema complex from Bonvests Holdings for S$37.75 million, the trust said in a Singapore Exchange (SGX) filing on Friday evening.

The trust manager’s chief executive officer, Chew Tuan Chiong, said in a statement Yishun 10 was next to FCT’s Northpoint shopping centre and acquiring its retail podium was in line with the trust’s strategy for Northpoint.

FCT added that an independent aggregate valuation of the 10 retail units done by Jones Lang LaSalle Property Consultants was S$40 million as at Sept 30, 2016. The tenure of the retail units was 99 years starting from April 1, 1990, it noted.

Both FCT and Bonvests are listed on SGX’s mainboard.

BlackRock said to explore sale of second Singapore office tower

BlackRock Inc, the world’s largest asset manager, is exploring a sale of its second office tower in Singapore’s central business district, people with knowledge of the matter said.

BlackRock has started reaching out to potential buyers to gauge their interest in Asia Square Tower 2, according to the people, who asked not to be identified as the information is private. The development could fetch about S$2 billion, the people said.

Asia Square Tower 2 sits on the site next to Tower 1, which the Qatari sovereign wealth fund agreed to buy in June from BlackRock for S$3.4 billion in Singapore’s biggest office transaction.

The 46-story Tower 2, spread over 784,100 square feet (72,845 square metres), includes office space as well as a Westin hotel. The building has an occupancy rate of over 90 per cent at the end of October, according to Cushman & Wakefield Inc.

Office transactions in Singapore have been picking up this year, with CapitaLand Commercial Trust agreeing in May to buy 60 per cent of the CapitaGreen tower in the central business district for S$393 million.
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Investment company MYP Ltd the next month said it plans to offer S$560 million for the Straits Trading Building. The government is also selling prime land in the Marina Bay financial district, the first such sale in nine years.

Representatives for BlackRock didn’t immediately answer phone calls seeking comment.

Asia Square is owned by MGPA, which was acquired by BlackRock in 2013. MGPA developed the two towers on two adjoining plots it won in 2007 at government land auctions.

Site where iconic Queenstown cinema once stood sold for S$78m

A PRIME commercial-zoned piece of vacant land – where the former Queenstown cinema and bowling centre once stood – has been sold for S$78 million. The price for the site, which has a balance lease term of 57 years, is understood to work out to about S$756 per square foot of potential gross floor area.

Located a stone’s throw from Queenstown MRT Station, the site is at the corner of Commonwealth Avenue and Margaret Drive; it comprises two lots of land adding up to 32,305 sq ft, net of some land to be set aside for road widening.

A unit of Crescendas Group, headed by Lawrence Leow, is selling the property to a company controlled by property developer and investor Cheong Sim Lam, a member of the family that developed International Plaza in Anson Road in the 1970s.

Crescendas was previously granted written permission to redevelop the site into a seven-storey commercial building with basement car parking lots; Urban Redevelopment Authority had stipulated a maximum gross floor area of 103,112 sq ft, of which up to 40 per cent could be for retail use.

That approval has since lapsed and the new owner will have to make a fresh application for the site’s redevelopment. Under the Urban Redevelompment Authority’s Master Plan 2014, the site is zoned for commercial use.

The Housing & Development Board granted a 99-year lease for the site starting Jan 1, 1975. Crescendas is understood to have bought the property in 2006 and in 2013 pulled down what was by then described as the dilapidated former Queenstown cinema and bowling alley.

Built in 1977 and shut in 1999, the iconic light blue and white building was once popular with dating couples, families and students from nearby schools.

Queues would form at the 1,715-seat cinema as movie-goers lined up for tickets. In addition to the 18-lane bowling centre, there were also fast-food restaurants and karaoke lounges in the building.

The property was demolished three years ago as it was purported to be structurally unstable, according to an earlier article in The Straits Times.

Today, the Queenstown Public Library – which opened 46 years ago and was granted conservation status in 2013- still stands near the site.

But the area is also undergoing a rejuvenation – with new private condos coming up including Commonwealth Towers and Queens Peak (the latter is being launched later this week) as well as new public housing developments (SkyOasis @ Dawson and SkyResidence @ Dawson). Cushman & Wakefield brokered the sale through private treaty.

Based on the land price of around S$756 per square foot per plot ratio, a new commercial development on the site could breakeven at about S$1,800-1,900 psf, say market watchers. The buyer, Mr Cheong, has been in the news in recent years for his property investments in the Central Business District. He bought two adjacent office buildings at 137 and 139 Cecil Street around 2009 but sold them in 2015 and 2014 respectively.

Along Marine Parade Central, he is developing a four-storey commercial building named IMall, on the former Republic Theatre site.

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.