http://www.straitstimes.com/Money/St...ry_690831.html

Jul 15, 2011

Joint venture for Market Street project

CapitaLand, CCT join hands with Japanese firm to redevelop carpark into office block

By Cheryl Lim


By 2014, a spanking new office tower will have taken the place of Singapore's oldest multi-storey carpark, along with the building's food court and shops. -- PHOTO: CAPITACOMMERCIAL TRUST

A JOINT venture has been set up to redevelop the landmark Market Street Car Park.

The $1.4 billion transformation of the building into an office block will be undertaken by CapitaCommercial Trust (CCT), its parent company CapitaLand and Japan's Mitsubishi Estate Asia (MEA).

They have formed a sub-trust called MSO Trust to carry out the venture. CapitaLand will hold 50 per cent, CCT 40 per cent and MEA the remaining 10 per cent.

MSO Trust will buy the building for $56 million.

The total redevelopment cost for the project has been pegged at $1.4 billion.

Under the deal, three years after the office tower gets its Temporary Occupancy Permit, CCT will have the option of acquiring the other 60 per stake in MSO Trust or the completed development.

CapitaLand Commercial chief executive Chong Lit Cheong said at a briefing yesterday that MEA had partnered CapitaLand in projects in Japan, Singapore and Vietnam.

'If you look at the competitive landscape now, if we can find like-minded partners to work with, we should. When you work with a partner, you actually take away a competitor,' he noted.

'The sites are getting bigger as well, so we should also share the risks and the rewards.'

Further, joint-venture partners are needed to meet the property fund guidelines of the Monetary Authority of Singapore, as the total project cost exceeds 10 per cent of CCT's total assets.

Ms Lynette Leong, chief executive of CCT's manager, CapitaCommercial Trust Management, said the tower would be completed in 2014, at which time office space is expected to be in short supply.

'The leasing should take place very quickly, so stabilisation should occur within the first year or two. By the third year, it should be doing quite well,' she said.

Mr Chong also talked about CapitaLand Commercial's expansion plans at yesterday's briefing.

He noted there could be opportunities for the firm to develop projects with commercial and residential elements in countries such as Malaysia, India and Japan.

CCT also announced its second-quarter results yesterday.

Distributable income to unitholders fell 2.3 per cent to $54.4 million for the three months ended June 30.

Net property income came in at $69.8 million, down 5.9 per cent from levels in the corresponding period last year.

Gross revenue declined as well, by 9.2 per cent, to $91 million.

For the first half, the results pointed to a similar performance.

Income distributable to unitholders fell 3.2 per cent, coming in at $106.5 million.

Net property income fell 7.9 per cent to $139.8 million, while gross revenue was down 9.9 per cent at $182 million.

CCT said it had collected less in rent because of the sale of Robinson Point and StarHub Centre. Lower occupancy rates at Six Battery Road and a rental review for a major tenant also contributed to the drop in revenue.

Unitholders will receive an estimated 3.77 cents per unit, to be paid on Aug 26 - 3.3 per cent less than the figure paid for the corresponding period last year.

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