Tag Archives: Suntec

BASF selling five office floors at Suntec Tower One for S$129.3m

FIVE office floors in Suntec Tower One are changing hands for a total sum of S$129.3 million, which works out to S$2,400 per square foot on strata area of 53,863 sq ft, based on caveats data.

The five floors – Levels 24, 25, 34, 35 and 36 – are being sold by BASF South East Asia, a part of German chemicals giant BASF, which currently occupies the space.

The floors are being bought by companies which are believed to be linked to the Singapore-based ARA group. Suntec City is on a site with a balance lease term of around 71 years.

BASF – which is involved in a broad range of areas from chemicals, plastics, performance products and crop protection products to oil and gas – is expected to lease back at least some of the space it is selling.

The Business Times could not reach officials at BASF in Singapore as well as ARA on Thursday.

Savills Singapore, which is understood to have brokered the transaction, declined to comment.

BASF is headquartered in Ludwigshafen, Germany. In 2015, the group posted sales of 70 billion euros (S$106 billion) and income from operations before special items of around 6.7 billion euros, according to information on its website.

Market watchers note that the S$2,400 psf pricing for the Suntec City office space in the latest deal is lower than the S$2,648 psf achieved in November 2015, when Maybank Kim Eng Properties sold three floors, Levels 12, 13 and 39, at the adjacent Suntec Tower Two to Suntec Real Estate Investment Trust (Suntec Reit) for S$101.56 million under a sale-and-leaseback arrangement. That transaction involved a total strata area of about 38,352 sq ft and a net property income yield of about 3.9 per cent.

CBRE director of investment properties Sammi Lim said: “The latest transacted price on the surface appears to be a lower per square foot rate than the deal a year ago, especially given that the floors in the recent transaction are on higher levels. However, given the total deal quantum, such bulk discount is considered fair by industry standards.

Differences between the structures of the two deals may also have affected the pricing, she added.

Suntec Reit is managed by ARA Trust Management (Suntec) – a fully owned subsidiary of ARA Asset Management. The Reit owns Suntec City mall, the whole of Suntec Towers Four and Five and some office units in Suntec Towers One, Two and Three, along with a 60.8 per cent effective interest in Suntec Singapore Convention & Exhibition Centre (Suntec Singapore). It also has a one-third stake in One Raffles Quay and a one-third interest in Marina Bay Financial Centre Towers 1 and 2 and the Marina Bay Link Mall.

While some industry observers suspect that Suntec Reit may be involved with the latest purchase of the five floors being sold by BASF, others suggest the buyer is more likely to be a private fund managed by ARA Asset Management.

ARA Asset Management recently completed the purchase of a 50 per cent stake in Capital Square from Alpha Investment Partners for S$475.5 million; the deal valued the entire building at S$951 million or S$2,450 psf.

Capital Square is on a site with about 78 years balance lease term.

Suntec hopes makeover brings new lease of life

The managers of Suntec City are optimistic that the mixed-use development will be well-positioned for its next phase of growth once it completes a makeover that will strengthen the fashion, entertainment and food & beverage offerings at its mall.

This will create a better mix of tenants that will attract more foot traffic and help the development unlock new business value through higher rental income, said Ms Susan Sim, Deputy Chief Executive of ARA Trust Management (Suntec) Limited, which manages the Suntec Real Estate Investment Trust.

“Part of it is about rightsizing — we’ve cut down the space for a huge hypermarket to open up more areas for popular fashion brands, which we couldn’t accommodate in the past,” Ms Sim said.

“We are also doubling our space for F&B to create a more diverse offering that will cater to more than just the office catchment we have.”

Ms Sim was speaking to TODAY ahead of an event later today marking the completion of the first phase of the makeover process. The S$410 million project was announced in 2011 just as the 17-year-old development seemed to be falling out of shoppers’ favour: Analysts have said Suntec is less accessible to pedestrian and tourism traffic compared to newer developments in the Orchard Road shopping belt, and the annual road closures for the Formula 1 Grand Prix have created further challenges.

But Suntec City — which comprises a mall and five office towers, and is linked to the nearby Suntec Singapore International Convention and Exhibition Centre — was by no means struggling, Ms Sim said, and the makeover, which will be completed next year, was not a rescue plan.

“Suntec City’s office and mall occupancy rate is always above 95 per cent, our mall attracts more than two million foot traffic per month, and the convention centre brings in seven million visitors per year,” she said.

“So the Asset Enhancement Initiative (AEI) was not announced to fix any problems. It’s more a self-push to modernise our hardware and ensure our market relevance. And as our tenant mix grows stronger, we will further enhance our existing competitive edge — which is the prime location that we have in Marina Bay, and a strong accessibility that two MRT stations give us,” Ms Sim said.

The makeover may reward Suntec City at least in the near term as the “newness” of the revamped mall will allow it to extract higher rents, said Mr Alan Cheong, Savills’ senior director for research and consultancy.

“But a retail operator is unlikely to fail anyway in Singapore, where the business is under-supplied as our population continues to grow. That’s why over the past decade the retail space per capita has shrunk from 8 square feet to about 7 square feet,” Mr Cheong said.

“So Suntec City will have no problem with occupancy and rental. But there will be a lot of uncertainties ahead on whether it can sustain its foot traffic in the long term as new malls continue to emerge in the area.”

Meanwhile, to tap the potential appeal arising from the revamp, new shops and restaurants have already opened near the famous Fountain of Wealth.

One of them is Ya Kun, which was relocated as part of the makeover process. Group director for branding and market development Jesher Loi is bullish about Suntec’s prospects.

“We are excited to be part of the enhancement project,” he told TODAY. “Already the lunch crowd here is quite substantial, so we look forward to serving the office catchment during weekdays and a growing number of weekend shoppers that the revamped mall is bound to attract.”

Source : Today – 12 Sep 2013