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The
sales of The Atrium @ Orchard (US$617 million) in 2007 made it to the list
of top five commercial real estate deals in the Asia-Pacific region in the
second quarter of 2008. - 2008
August 19 BUSINESS
TIMES
CapitaMall Trust bags
Atrium for $839.8m
 
It will strengthen its retail
presence by integrating Atrium, Plaza Singapura
CapitaMall Trust (CMT) yesterday emerged
the winner to clinch the Atrium@Orchard with a purchase price of $839.8
million or $2,249 per square foot (psf) of net lettable area (NLA) from the
Singapore Land Authority.
This has raised the value of its assets
to $6.9 billion and prompted the trust manager to revise its local targeted
portfolio size from $8 billion to $9 billion by 2010.
This acquisition confirms an earlier BT
report which pointed out CMT as one of the two final contenders for the
Atrium and estimated the price of the sale to be $2,200-2,300 psf of NLA.
CMT is set to strengthen its retail
presence at the premier Orchard shopping belt, given its plans to create
more than 100,000 sq ft of prime retail lettable area at the Atrium.
Situated next to one of CMT's existing
properties, Plaza Singapura, Atrium comprises two Grade A office towers of
seven and 10 storeys and some ground floor retail space.
CMT said that it plans to integrate
Atrium with Plaza Singapura to create a combined 170 m of prime retail
frontage along the Orchard Road strip to create duplex flagship stores and
over 900,000 sq ft of net lettable space.
By decanting and converting lower
yielding spaces at the Atrium and changing the use of gross floor area, the
retail net lettable area on levels 1 and 2 of the property is expected to
grow from the current 16,092 sq ft to 100,590 sq ft.
Pua Seck Guan, CEO of CMT, said in a
briefing yesterday that the retail enhancement works at Atrium is expected
to take place within the next three years.
'With the improved integrated asset plan
and the enhanced direct connectivity from the Dhoby Ghaut MRT interchange
station to Level 3 of Plaza Singapura, the values of both assets are
expected to increase,' he added.
He noted that the grade A office space at
the Atrium is currently under-rented, which provides opportunities for value
creation. The current office rentals are locked in at an average $5.87 per
square foot per month (psfpm), resulting in an initial property yield of
about 2.1 per cent.
Using the recent renewal of an office
lease at Atrium at $13 psfpm as a gauge, Mr Pua said that there is room for
average office rental to double to $10-12 psfpm by 2010-2011, even after
taking into account rental cap conditions in certain anchor tenants' leases.
Assuming that all the office leases are
being renewed at $10 psfpm today, the estimated property yield today will be
about 4.5 per cent, Mr Pua said.
The majority of the leases - some 89 per
cent of the total committed NLA - will be up for renewal in 2009 and 2010.
Only 7.9 per cent of the total committed NLA is due for renewal this year.
The acquisition of the Atrium, brokered
by CB Richard Ellis, is expected to be completed by end-August. The total
acquisition costs, including other fees and expenses, will work out to $850
million.
CMT will fund it with the issuance of
$650 million worth of convertible bonds and the balance from the $395
million proceeds from its medium term notes programme that it has issued.
- 2008 May 23 BUSINESS
TIMES
CapitaLand, US fund
jostle for The Atrium
The race to snap up The
Atrium @ Orchard is said to have narrowed to two parties: a US fund, and a
unit of CapitaLand group, possibly CapitaMall Trust (CMT), which owns
Plaza Singapura next door. The price is understood to be in the region of
$2,200-$2,300 per square foot of net lettable area (NLA). Based on the
property's total NLA of around 370,000 sq ft, the asset would be priced at
over $800 million. -
2008 May 21
BUSINESS
TIMES
Price will be over $800m
The property is being sold by
Singapore Land Authority (SLA).
BT understands a deal is in the process
of being sewn up.
While some analysts questioned the
rationale behind CMT's interest in a predominantly office development,
seasoned property investors said CapitaLand or CMT would be the most logical
buyer of the asset, given the synergies that can be drawn from owning the
Plaza Singapura mall.
It can also reposition The Atrium, which
is a predominantly office development, to have a bigger retail component,
given its Orchard Road frontage.
The expression-of-interest exercise for
the Grade A office property closed on Feb 22 and is believed to have
attracted a number of offers. The two highest bidders - the US fund and CMT/CapitaLand
- were selected to proceed with due diligence. Industry players do not seem
to know much about the US fund or its plans for the property.
SLA will issue a fresh 99-year leasehold
tenure for the property from mid-2008, according to earlier reports. The
Atrium comprises two office towers, seven and 10 storeys high, with
ground-floor retail space.
Currently, The Atrium's retail component
is confined to only about 10,000 sq ft out of the total 370,000 sq ft NLA.
Some feel that the eventual buyer of The
Atrium may introduce more shop/ restaurant space into the development given
its location in Singapore's main shopping belt. One way would be to decant
space from the upper floors and create higher-value retail/ restaurant space
on the lower levels - a tried-and-tested CMT asset enhancement formula.
'Another way would be to punch an atrium into the development and install
escalators to bring shoppers up to the first few levels of the property.
There may also be scope to introduce retail space in the basement,' a market
watcher suggested.
However, it may take a while before such
plans are executed due to the current office crunch and ongoing leases in
the property.
'If CapitaLand Retail/ CMT end up with
The Atrium, there'll also be scope to better connect it with the group's
Plaza Singapura mall. Perhaps they could buy/lease state land between the
two properties and build low-rise facilities suitable for, say, alfresco
dining. Extending retail activities closer to Orchard Road would also help
to draw more shoppers to Plaza Singapura,' an industry observer said.
Completed in 2002, The Atrium's current
average monthly rent (based on existing leases) is understood to be below $6
psf - translating to a passing net property yield of just over 2 per cent.
However, BT understands this could go up to more than 3 per cent within the
next 12 months.
CMT is currently trading at about 4 per
cent distribution yield on the stock market. Some suggested using a
significant debt component to fund the acquisition. As at March 31, 2008,
CMT had an asset size of about $5.9 billion and a gearing ratio of 35.3 per
cent. CMT could fund the acquisition of The Atrium entirely through debt and
still not exceed 45 per cent gearing at trust level. 'If the cost of funding
is sufficiently below The Atrium's net property yield, the acquisition could
still be immediately yield accretive to CMT. If not, there's always the
possibility of the property being initially acquired by CapitaLand Retail
and warehoused for asset enhancement and other yield- boosting exercises
before being offered to CMT,' an analyst suggests.
The $2,200-2,300 psf price currently
being negotiated is lower than the 'above $2,700 psf' price tag indicated at
the start of the property's marketing campaign in January. However,
sentiment in the office investment market has weakened, because of
difficulty in securing debt funding, and concerns of surging supply
post-2011.
The asset is said to be stuck with some
long leases locked at pretty low rental rates. Tenants include Temasek
Holdings, Barclays and MTV Asia.
2008 May 18 BUSINESS
TIMES
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