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Vintage building: One area of concern with HSBC
Building which was completed in 1982, say market watchers, is its age
CCT to buy HSBC building in Collyer Quay
for $158m
CapitaCommercial Trust has signed
a deal to buy HSBC Building in Collyer Quay for $158.5 million, marking its
first purchase since listing in May.
CCT's purchase confirmed an earlier BT
report. At $158.5 million for the 999-year leasehold building, this works
out to $790 per square foot of nett lettable area.
It is expected to generate an annualised
property yield of 5.1 per cent for the financial year ending Dec 31, 2005.
This is yield accretive to CCT
unitholders based on CCT's implied property yield of 4.2 per cent based on
the closing price of $1.51 on Jan 31. CCT ended at $1.56 yesterday, up 5
cents or 3.3 per cent.
CCT's distribution yield is 4.05 per cent
based on its annualised distribution per unit of 6.32 cents and its closing
price of $1.56 yesterday.
Market watchers expect CCT to issue new
units to help fund the acquisition of HSBC Building.
Under the deal, The Hongkong and Shanghai
Banking Corporation will lease back the entire HSBC Building for seven
years.
'We announced two weeks ago that CCT aims
to double its asset portfolio size within a three-year time frame,' said CCT
Management chairman Sum Soon Lim. 'The acquisition of HSBC Building is our
first step forward.'
CCT has a portfolio of $1.9 billion of
seven properties, including Capital Tower, 6 Battery Road and Market Street
Car Park.
It has said it plans to double this to $4
billion by 2007, with overseas assets making up 30 per cent of its
portfolio. - by Andrea Tan
SINGAPORE
BUSINESS TIMES 3 Feb 05
CapitaCommercial Trust eyeing HSBC
Building
Assuming
a price of about $150m, the yield should come in at over 5%
CapitaCommercial Trust eyeing HSBC
Building at Collyer Quay, sources have told Business
Times.
CCT is said to be doing due diligence on
the 999-year leasehold property. Last year, open-ended German fund Deka
Immobilien Investment was in discussions to buy the building but a deal did
not materialise.
As in the earlier discussions, a
transaction for the property, if it materialises this time, will probably
include a sale-and-leaseback deal. The bank occupies the entire building,
which has about close to 199,000 sq ft of lettable area.
Market watchers say that assuming a price
of about $150 million, the yield should come in at over 5 per cent. This
should make the acquisition yield accretive to CCT, since the trust is
currently trading at a distribution yield of 4.4 per cent, based on the
trust's closing price yesterday on the stock market of $1.28 and its
forecast distribution of 5.68 cents per unit for the current year.
CCT will announce its 2004 results
tomorrow.
One area of concern with HSBC Building,
say market watchers, is its age. It was completed 23 years ago and typically
older buildings require more maintenance and capital expenditure, which eats
into returns for potential investors.
But this issue can be addressed through
the structure of any potential deal, for instance, requiring the seller to
foot part of the asset's future capital expenditure bill.
If CCT does indeed buy HSBC Building, it
would be its first acquisition since its creation and flotation last year.
The trust, holding seven commercial properties, was created out of a
demerger from parent CapitaLand, CapitaLand gave shareholders 200 CCT units
for every 1,000 shares.
The seven properties that CCT owns are
Capital Tower, 6 Battery Road, Robinson Point, StarHub Centre, the Golden
Shoe and Market Street car parks and Bugis Village.
HSBC Building has 18 storeys and three
basements (for carparks). It has a site area of about 17,500 sq ft. The
building was completed in 1982, although the bank has been at the site for
more than 100 years since it began doing business here.
Over the past few years, HSBC has been
divesting its property assets on the island, including two huge freehold
sites in the Good Class Bungalow areas in Jervois Road and Bishopsgate.
The 201,782 sq ft Jervois Road site
fetched about $60 million around late 2000, while the 276,112 sq ft site at
Bishopsgate was sold for $69.8 million in 2003. In the same year, the bank
also sold the historic MacDonald House at Dhoby Ghaut for $36 million. -
by Kalpana Rashiwala SINGAPORE
BUSINESS TIMES 18 January 2005
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