reporter2
01-06-22, 10:50
After delay, IOI Properties’ Central Boulevard office project may be coming to market at opportune time
Jun 01, 2022
IOI Properties Group’s long-awaited office project along Central Boulevard in Singapore’s Central Business District (CBD) is scheduled to receive Temporary Occupation Permit in the third quarter of 2023, more than 6 years after it was awarded the site in November 2016 by the Urban Redevelopment Authority (URA).
At the time, the Bursa Malaysia-listed group had made the headlines with its top bid of nearly S$2.57 billion or S$1,689 per square foot per plot ratio (psf ppr) – the highest in absolute dollar quantum as well as psf ppr for a Government Land Sales site in Singapore then.
The project had reportedly been targeted for completion this year. Observers said that the delay is due partly to the site’s technical constraints, as well as construction disruption due to the Covid-19 outbreak.
But the project will come just as the Singapore Grade A office market is in tight supply.
The Business Times reported recently that tech heavyweights Amazon and Facebook parent Meta are said to be in advanced discussions to lease offices at IOI Central Boulevard Towers. By some accounts, between the 2 of them, they could lease about 650,000 to 670,000 sq ft — or about half the project’s 1.26 million sq ft net lettable area (NLA) of offices.
Will securing these 2 big names as the initial anchor tenants pave the way for IOI Properties to achieve its target — based on market talk — of S$12-14 psf a month in gross effective average rent?
Let’s assume that the developer’s average rent for the office component lands closer to the lower end of its target range, say, S$12.50 psf.
It is a common strategy for developers of new office projects to clinch the initial big-name anchors at preferential rental rates to kick-start leasing activity in the project, and then ramp up rents for subsequent leases.
Some office market observers estimate that Amazon, because it began discussions with IOI Properties much earlier, may be negotiating for a rent around the S$10.50 psf range, whereas the rental rate could be slightly higher, possibly nearer to the S$11 psf range, for Meta, which began talks to lease space in the development more recently.
For IOI Properties to achieve an overall office average monthly rent of S$12.50 psf, it would need to find tenants to take the balance of around 600,000 sq ft office space in the development at about S$14.50 psf a month. Given that this will be the only CBD Grade A project slated for completion next year, this rental may be quite achievable — especially for part-floor tenants. Already, some landlords of premium CBD office buildings are holding on to rents of at least S$12 psf.
There has been some speculation that IOI may be open to selling 1 of the 2 towers in the development.
By some estimates, IOI’s overall breakeven cost for the project is about S$3,030 psf on net lettable area — inclusive of 30,000 sq ft of retail space. Based on the above rental projections, on a fully-let, stabilised basis, IOI Properties would be looking at about 4 per cent net yield on its breakeven cost.
For a new development on a site with about 93 years’ balance leasehold tenure, this leaves room for IOI to make a reasonable gain from a partial sale of the project.
The group is hardly a newbie in the Singapore property market. More than 2 decades ago, it developed the former IOI Plaza, a 12-storey granite office block at the corner of Middle Road and Prinsep Street, on a site clinched in a URA tender in 1996. In 2010, the group sold the building to Singapore Pools.
IOI Properties partnered City Developments : C09 +0.12% for the South Beach mixed-development project and Ho Bee Land : H13 0% for 2 condo projects in Sentosa Cove – Seascape and Cape Royale. It also developed The Trilinq condo in Clementi.
The group is set to expand its presence in the property market here. At another URA tender in September last year, it emerged as the sole bidder for a site along Marina View (near its Central Boulevard project) earmarked largely for private residences and hotel use. The group bagged the 99-year leasehold site for S$1.508 billion or S$1,379 psf ppr. The price was seen to be on the low side.
Shares of IOI have fallen 8.2 per cent this year, to close at RM1.01 on Tuesday (May 31). That puts its year-to-date performance slightly below its peers. The FTSE Bursa Malaysia Emas Real Estate index is down 2 per cent over the same period.
But the impending completion of Central Boulevard has already turned at least 1 analyst more positive on IOI Properties’ stock. RHB Research believes that the property will form a good earnings base for higher dividends in the future.
Perhaps investors will be able to expect more from this developer.
https://www.businesstimes.com.sg/opinion/after-delay-ioi-properties-central-boulevard-office-project-may-be-coming-to-market-at
Jun 01, 2022
IOI Properties Group’s long-awaited office project along Central Boulevard in Singapore’s Central Business District (CBD) is scheduled to receive Temporary Occupation Permit in the third quarter of 2023, more than 6 years after it was awarded the site in November 2016 by the Urban Redevelopment Authority (URA).
At the time, the Bursa Malaysia-listed group had made the headlines with its top bid of nearly S$2.57 billion or S$1,689 per square foot per plot ratio (psf ppr) – the highest in absolute dollar quantum as well as psf ppr for a Government Land Sales site in Singapore then.
The project had reportedly been targeted for completion this year. Observers said that the delay is due partly to the site’s technical constraints, as well as construction disruption due to the Covid-19 outbreak.
But the project will come just as the Singapore Grade A office market is in tight supply.
The Business Times reported recently that tech heavyweights Amazon and Facebook parent Meta are said to be in advanced discussions to lease offices at IOI Central Boulevard Towers. By some accounts, between the 2 of them, they could lease about 650,000 to 670,000 sq ft — or about half the project’s 1.26 million sq ft net lettable area (NLA) of offices.
Will securing these 2 big names as the initial anchor tenants pave the way for IOI Properties to achieve its target — based on market talk — of S$12-14 psf a month in gross effective average rent?
Let’s assume that the developer’s average rent for the office component lands closer to the lower end of its target range, say, S$12.50 psf.
It is a common strategy for developers of new office projects to clinch the initial big-name anchors at preferential rental rates to kick-start leasing activity in the project, and then ramp up rents for subsequent leases.
Some office market observers estimate that Amazon, because it began discussions with IOI Properties much earlier, may be negotiating for a rent around the S$10.50 psf range, whereas the rental rate could be slightly higher, possibly nearer to the S$11 psf range, for Meta, which began talks to lease space in the development more recently.
For IOI Properties to achieve an overall office average monthly rent of S$12.50 psf, it would need to find tenants to take the balance of around 600,000 sq ft office space in the development at about S$14.50 psf a month. Given that this will be the only CBD Grade A project slated for completion next year, this rental may be quite achievable — especially for part-floor tenants. Already, some landlords of premium CBD office buildings are holding on to rents of at least S$12 psf.
There has been some speculation that IOI may be open to selling 1 of the 2 towers in the development.
By some estimates, IOI’s overall breakeven cost for the project is about S$3,030 psf on net lettable area — inclusive of 30,000 sq ft of retail space. Based on the above rental projections, on a fully-let, stabilised basis, IOI Properties would be looking at about 4 per cent net yield on its breakeven cost.
For a new development on a site with about 93 years’ balance leasehold tenure, this leaves room for IOI to make a reasonable gain from a partial sale of the project.
The group is hardly a newbie in the Singapore property market. More than 2 decades ago, it developed the former IOI Plaza, a 12-storey granite office block at the corner of Middle Road and Prinsep Street, on a site clinched in a URA tender in 1996. In 2010, the group sold the building to Singapore Pools.
IOI Properties partnered City Developments : C09 +0.12% for the South Beach mixed-development project and Ho Bee Land : H13 0% for 2 condo projects in Sentosa Cove – Seascape and Cape Royale. It also developed The Trilinq condo in Clementi.
The group is set to expand its presence in the property market here. At another URA tender in September last year, it emerged as the sole bidder for a site along Marina View (near its Central Boulevard project) earmarked largely for private residences and hotel use. The group bagged the 99-year leasehold site for S$1.508 billion or S$1,379 psf ppr. The price was seen to be on the low side.
Shares of IOI have fallen 8.2 per cent this year, to close at RM1.01 on Tuesday (May 31). That puts its year-to-date performance slightly below its peers. The FTSE Bursa Malaysia Emas Real Estate index is down 2 per cent over the same period.
But the impending completion of Central Boulevard has already turned at least 1 analyst more positive on IOI Properties’ stock. RHB Research believes that the property will form a good earnings base for higher dividends in the future.
Perhaps investors will be able to expect more from this developer.
https://www.businesstimes.com.sg/opinion/after-delay-ioi-properties-central-boulevard-office-project-may-be-coming-to-market-at