Tricky to convert old schools into offices

April 21, 2008

Tricky to convert old schools into offices

Some firms leasing the buildings from Govt have run into teething problems

By Fiona Chan, Property Reporter

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TAKING SHAPE: Project manager Leong Peng Ho oversees refurbishing works at the former River valley Primary School. Behind him is one of the converted blocks. -- ST PHOTO: ASHLEIGH SIM

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BEFORE: The vacated premises of the former school - just five minutes from Orchard Road. -- PHOTO: ERC HOLDINGS

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AFTER: The spanking new offices of ERC Holdings - all for a rent of about $2 psf. -- PHOTO: ERC HOLDINGS


IT WAS an unusual proposition by the Government: Turn old, empty school buildings into functional offices fit for companies to occupy.

Firms hit by the acute office crunch last year responded warmly to the suggestion. They took up several former schools leased out by the Singapore Land Authority (SLA), drawn by their attractive locations, sizeable grounds and low rentals.

The offer by the Government was part of its efforts to meet the immediate needs of companies forced out of the central areas by office shortages and soaring rents. Since February last year, the SLA has tendered out 15 vacant buildings, including schools and community centres.

Experts hailed the move as prompt and quick-thinking - but some of the companies that actually took on the conversion tasks quickly found themselves mired in unexpected problems and hidden costs.

The SLA does not make public the names of companies that win its tenders, but it asked three firms to share their experiences with The Straits Times. All said that while they had expected some complications with these old buildings, they had not expected the going to be so rough.

Two ended up busting their renovation budgets tackling problems such as a lack of power supply, flooding grounds and missing blueprints.

Mr Andy Ong, the managing director of education provider ERC Holdings, had to get leaking pipes repaired at the former River Valley Primary School after they flooded the field twice.

'We had no water for three days while they were being fixed,' he said. 'We had to bring in portable toilets.'

The conversion process was 'nightmarish', he added. 'Every step we took was like being on a roller coaster. It was much harder than we had thought it would be.'

Property investment firm Richzone, which is converting the former Pasir Panjang ITE into modern office blocks, also ran into problems.

Heavy rains led to more water flowing in than the existing drainage could handle, so Richzone had to spend more than $1 million on 1km of new and improved drains. Another $1 million had to be spent on underground wiring and electricity. A new substation was installed, as were four lifts.

'It was not just plastic surgery, it was more like organ transplants,' said Ms Agnes Tay of Knight Frank, who worked closely with Richzone in leasing out the former school as offices.

Both ERC and Richzone ran over budget, the latter by about 30 per cent. Richzone said it now needs about five years to break even; it had estimated four originally. Meanwhile, it has to pay rent to the Government even before it collects any from its own tenants.

A third company, Hean Nerng, which specialises in converting old properties for new uses, is still within the $4 million budget it drew up for renovating the former Gan Eng Seng Secondary at Raeburn Park.

But managing director Kelvin Lim said Hean Nerng would now need longer to break even on the project because of unanticipated hiccups. For one thing, the old school had been designed to fit safety codes that are now outdated.

'Part of the school building we inherited could not be used because it adhered to old fire safety codes,' Mr Lim said.

For instance, a soundproof room in the basement that had been used by students as the school's rifle range is now just dead space because it has only one exit.

Nevertheless, having graduated from the school of hard knocks, most of the companies are now happy with their newly done-up offices and their sprawling grounds.

'Financially, it works out to be about equal to our old space, but we now have our own building and branding, and all this is unquantifiable,' said ERC's Mr Ong.

'People are amazed we're occupying such a big space in a prime location. Even if we stay only six years, it would be worth it.'

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A dream come true despite obstacles

TRAINING firm ERC Holdings had to move out of its Robinson Road premises when rents there tripled.

Rather than move to an affordable but inconvenient location, managing director Andy Ong decided to tender for the former River Valley Primary School and convert it into offices.

'It's a great location: five minutes from Orchard Road, five minutes from our old office,' he said.

ERC kept 5,000 sq ft at Robinson Road, a quarter of its original space, and moved the rest over to River Valley. With 250,000 sq ft of land and 70,000 sq ft of office space, there was so much room, ERC leased out half to luxury watchmaker Audemars Piguet.

The rents, at about $2 per sq ft (psf), seemed like a dream. At Robinson Road, they had come to over $3 psf and were set to rise to more than $10 psf. But the dream soured a bit for Mr Ong when he realised how much work had to be done to convert the premises. 'My to-do list had 210 items.'

As for the expenses, he said: 'The bills are still coming in. Hopefully, we will not exceed $5 million.'

Still, he said the company had 'no choice' but to take on this project. 'We would have spent $5 million in rental over three years anyway.'

April 21, 2008

Converted buildings offer huge payoffs


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FROM OLD SCHOOL...: The building that used to house Gan Eng Seng Secondary School required extensive work to upgrade its facilities for office use.

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...TO CASH COW: Mr Lim's firm, which converted the school into offices, is confident the whole building will be rented out by year-end. His firm sub-lets the offices at $4.50 psf. -- ST PHOTO: CHEW SENG KIM

WHEN the former Pasir Panjang ITE building at 991 Alexandra Road was put up for tender last year, property investment firm Richzone jumped at what it saw as a prize plot.

The site, opposite the PSA Building, offered 265,000 sq ft of office space in an established commercial and industrial zone.

'It was delivered to us in a very rundown condition because it had been empty for eight years,' Richzone said.

The firm, set up by a group of property veterans, planned to turn the building into modern low-rise offices that could be leased out to other tenants.

But it ran into flooding and power problems and broke the budget because of inflated construction costs and unexpected 'invisible expenses'.

Still, the work has paid off. The first phase of offices has been fully taken up by big-name tenants, such as LG Electronics. They are paying about a third of what they would have to fork out downtown.

Another company, Hean Nerng, also got more than it bargained for with the former Gan Eng Seng Secondary School.

Luckily, Mr Kelvin Lim, the managing director of the space resource management firm, is an old hand at converting worn-out buildings for new uses.

He was attracted by the building's size - it sits on a 290,626 sq ft plot in Raeburn Park near Outram - and its low rent.

Hean Nerng is paying about $200,000 a month, or $1.25 per sq ft (psf), and sub-letting the converted offices at about $4.50 psf. About 40 per cent of the building has been occupied by tenants that include the Marketing Institute of Singapore, the National Safety Council and several advertising companies.

A lot of work had to be done to maximise the building's potential office space. The firm also had to spend nearly $1 million to upgrade the substation to provide air-conditioning.

Mr Lim, however, is confident that the whole building will be rented out by year-end, even though demand has slowed because of weaker sentiment and because more office space has been released by the Government.

'We managed to overcome challenges greater than we had expected, so there are no regrets,' he said.

FIONA CHAN