Thursday, June 17, 2010

En bloc: Tanglin Shopping Centre up for sale again

Reserve price of $1.25b works out to a high $4,167 psf ppr

THE freehold Tanglin Shopping Centre is on the en bloc trail again, and the reserve price listed in the collective sales agreement (CSA), for which signing has started, is understood to be $1.25 billion.

Based on this, the unit land price works out to a whopping sum of about $4,167 per square foot of potential gross floor area.

The assumption is that no development charge is payable and that the new owner will be able to build up to the property's existing gross floor area (GFA) of about 300,000 sq ft, even though this slightly exceeds the maximum 287,700 sq ft under Master Plan 2008.

The unit land price would be a record level and property consultants polled by BT yesterday evening consider it steep.

A seasoned property consultant shared some broad-brush estimates with BT last night: 'Assuming the site is redeveloped into a combination of medical suites, mall and apartments, the breakeven cost for the retail component would be about $7,000-$7,500 psf; for medical suites around $6,000 psf and more than $5,000 psf for residential. These are all above current pricing levels.'

For instance, ION Orchard mall was valued at the end of last year at $3,950 psf.

Although built on a 99-year leasehold site, it boasts a superior location above Orchard MRT Station compared with Tanglin Shopping Centre.

BT understands that based on the $1.25 billion reserve price for Tanglin Shopping Centre, the potential payout to some owners of second-floor shop units works out to $7,000-7,500 psf of existing strata area.

'If I were an owner, I would definitely want to sell at that kind of price!' quipped the head of investment sales at a major property consulting group.

News of collective sales efforts for Tanglin Shopping Centre came to light yesterday when Millennium & Copthorne Hotels, the London-listed hotel arm of City Developments Ltd (CDL), said in a statutory filing that it had signed a CSA for the sale of its strata-titled interest in the complex.

BT understands that ERA has been appointed to handle the collective sale but the firm's senior marketing director Jean Goh declined to disclose the asking price, saying it was too early. 'We have just started the signing,' she added.

M&C's CEO, Richard Hartman, said in yesterday's filing: 'Whilst discussions regarding the potential disposal of our interest in Tanglin Shopping Centre are at a very preliminary stage, we felt it appropriate to disclose we had entered into the CSA.

'The board would highlight the highly conditional nature of the proposed disposal and that the sensitive nature of the discussions precludes disclosure of further commercial information or terms at this time. We will provide a further update on progress as and when appropriate.'

M&C holds its stake in the shopping and office complex through its wholly owned subsidiary, King's Tanglin Shopping Pte Ltd.

The company owns 85 freehold strata units comprising retail/office units and 325 carpark lots that have been held as a long-term investment since 1981. Based on earlier media reports, this works out to a stake of about 35 per cent in the complex.

Some analysts say that assuming ERA garners the minimum 80 per cent consent level from owners, CDL and/or its parent Hong Leong Group would be keen on the asset, given the group's sizeable presence in the location - including St Regis Hotel and the Orchard Hotel and shopping arcade.

However, whether Hong Leong would want to pay the over $4,000 psf per plot ratio for Tanglin Shopping Centre remains to be seen.

'They have an advantage over other bidders since their unit M&C already owns 35 per cent of the complex; so their effective outlay will be smaller,' an agent said.

Tanglin Shopping Centre is on a freehold site of about 68,500 sq ft and has a strata area of about 230,000 sq ft.

It comprises a retail podium (part of which houses medical suites), a 12-storey office tower, and carparking facilities.

Under Master Plan 2008, the site is zoned for commercial use with a 4.2 plot ratio (ratio of maximum potential GFA to land area) and a maximum height of 20 storeys.

The complex was developed in two stages, in the early 1970s and early 1980s.

Source: Business Times, 17 Jun 2010

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