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Thread: CapitaMall Trust bags Atrium for $839.8m

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    Default CapitaMall Trust bags Atrium for $839.8m,00.html?

    Published May 23, 2008

    CapitaMall Trust bags Atrium for $839.8m

    It will strengthen its retail presence by integrating Atrium, Plaza Singapura


    (SINGAPORE) CapitaMall Trust (CMT) yesterday emerged the winner to clinch the Atrium@Orchard with a purchase price of $839.8 million or $2,249 per square foot (psf) of net lettable area (NLA) from the Singapore Land Authority.

    This has raised the value of its assets to $6.9 billion and prompted the trust manager to revise its local targeted portfolio size from $8 billion to $9 billion by 2010.

    This acquisition confirms an earlier BT report which pointed out CMT as one of the two final contenders for the Atrium and estimated the price of the sale to be $2,200-2,300 psf of NLA.

    CMT is set to strengthen its retail presence at the premier Orchard shopping belt, given its plans to create more than 100,000 sq ft of prime retail lettable area at the Atrium.

    Situated next to one of CMT's existing properties, Plaza Singapura, Atrium comprises two Grade A office towers of seven and 10 storeys and some ground floor retail space.

    CMT said that it plans to integrate Atrium with Plaza Singapura to create a combined 170 m of prime retail frontage along the Orchard Road strip to create duplex flagship stores and over 900,000 sq ft of net lettable space.

    By decanting and converting lower yielding spaces at the Atrium and changing the use of gross floor area, the retail net lettable area on levels 1 and 2 of the property is expected to grow from the current 16,092 sq ft to 100,590 sq ft.

    Pua Seck Guan, CEO of CMT, said in a briefing yesterday that the retail enhancement works at Atrium is expected to take place within the next three years.

    'With the improved integrated asset plan and the enhanced direct connectivity from the Dhoby Ghaut MRT interchange station to Level 3 of Plaza Singapura, the values of both assets are expected to increase,' he added.

    He noted that the grade A office space at the Atrium is currently under-rented, which provides opportunities for value creation. The current office rentals are locked in at an average $5.87 per square foot per month (psfpm), resulting in an initial property yield of about 2.1 per cent.

    Using the recent renewal of an office lease at Atrium at $13 psfpm as a gauge, Mr Pua said that there is room for average office rental to double to $10-12 psfpm by 2010-2011, even after taking into account rental cap conditions in certain anchor tenants' leases.

    Assuming that all the office leases are being renewed at $10 psfpm today, the estimated property yield today will be about 4.5 per cent, Mr Pua said.

    The majority of the leases - some 89 per cent of the total committed NLA - will be up for renewal in 2009 and 2010. Only 7.9 per cent of the total committed NLA is due for renewal this year.

    The acquisition of the Atrium, brokered by CB Richard Ellis, is expected to be completed by end-August. The total acquisition costs, including other fees and expenses, will work out to $850 million.

    CMT will fund it with the issuance of $650 million worth of convertible bonds and the balance from the $395 million proceeds from its medium term notes programme that it has issued.

    Moody's yesterday affirmed CapitaMall's 'A2' rating but changed the outlook to negative, citing the increase in gearing ratio to 45 per cent from 35 per cent and other execution risks related to the redevelopment of Atrium.

    But Mr Pua said that he is confident that the gearing ratio will come down soon.

    The five-year convertible bonds (CBs) due 2013, which is fully underwritten by Goldman Sachs, has a coupon rate of one per cent, a yield to maturity of 2-3 per cent per annum and a conversion premium of 20-35 per cent over the share price. Even if the CBs are fully converted, the funding provides yield accretion on a stabilised basis, CMT said.

    Yesterday, CMT was trading at $3.51, 12 cents lower than Wednesday's close before its units were halted, pending the announcement.

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    Default Re: CapitaMall Trust bags Atrium for $839.8m

    May 23, 2008

    CapitaMall snaps up Atrium@Orchard for $840m

    It has plans for dramatic makeover with 100,000 sq ft of new retail space

    By Lee Su Shyan, Assistant Money Editor

    SEAMLESS SHOPPING EXPERIENCE: This artist's impression shows how the planned integration of Plaza Singapura and The Atrium@Orchard will create 170m of prime retail frontage along Orchard Road. -- PHOTO: CAPITALAND

    THE Dhoby Ghaut shopping area will soon be jazzed up now that CapitaMall Trust (CMT) has bought a prime building there for $839.8 million - right next to Plaza Singapura, which it already owns.

    A makeover is already under way at one end of Orchard Road with the upcoming Ion Orchard. Further along, Somerset Central is set to transform the Somerset area. Now, it is Dhoby Ghaut's turn.

    CMT, the owner of retail malls such as Tampines Mall and Junction 8, said yesterday it had acquired The Atrium@Orchard from the Government.

    The building, with two office towers of 10 and seven storeys, will boast an extra 100,000 sq ft in retail space, including the vast ground-level atrium and the area connecting it to Plaza Singapura. The Atrium is linked to the Dhoby Ghaut MRT interchange.

    CMT's plans mean shoppers can look forward to large covered spaces, better links between The Atrium and Plaza Singapura, and more shops as CMT moves to integrate the two buildings.

    CMT wants to attract overseas brands or local players such as watch shops or jewellery shops that might be keen to open flagship stores there given the extensive 170m prime frontage.

    The chief executive of CapitaMall Trust Management, Mr Pua Seck Guan, said: 'We have strengthened our foothold in the downtown area of Orchard Road.' CMT already co-owns Raffles City with CapitaCommercial Trust.

    The office development at The Atrium has about 20 tenants, including Temasek Holdings, Barclays Capital and MTV Asia. It was put up for sale by the Singapore Land Authority (SLA).

    Already, government approval has been given to cover the state land or open space in front of Plaza Singapura.

    Now that CMT is acquiring The Atrium, more ambitious plans are in the works, such as a fully sheltered link between the two buildings.

    Also, the second floor of The Atrium will be connected to the corresponding floor of Plaza Singapura, Mr Pua said.

    CMT is exploring if it would be possible to build more links between the higher floors or between the basements of the two buildings.

    For retailers looking to sport an extra eye-catching presence, CMT plans to offer a striking design of duplex or double-storey stores.

    With the integration, shoppers will also benefit from the direct links to the MRT station from The Atrium. Once the Circle Line is up and running, the Dhoby Ghaut station will offer commuters the convenience of three MRT lines.

    In total, CMT's plans involve adding about 100,000 sq ft of retail space and taking away about 55,000 sq ft of office space. Mr Pua did not disclose the construction costs, but analysts said they could come to a few hundred dollars per sq ft (psf).

    Once completed in about three years' time, the development will boast a total lettable area of about 900,000 sq ft, making it one of the largest developments on Orchard Road.

    There are concerns that the added retail space will come onstream in uncertain economic times, but Mr Pua said 'there is no sign of a consumer slowdown at the malls'.

    Some analysts also have concerns about the purchase because the current yield from the property is just 2.1 per cent, because of the low rentals inked by SLA.

    However, Mr Pua said that with leases up for renewal, 'there is the potential to double the average office rental of the property by 2010'.

    He is confident that increasing the ground floor space will improve the rentals. Units on the ground floor of Plaza Singapura command over $20 psf in rent.

    CMT's purchase will be funded mostly by a $650 million convertible bond issue. Fully underwritten by Goldman Sachs, the issue will have a coupon rate of 1 per cent and a conversion premium of 20 per cent to 35 per cent.

    CMT units were halted from trading yesterday afternoon before the news was announced.

    Yesterday morning, they closed down 12 cents at $3.51.

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