CapitaCommercial plans to redevelop car park complex into office building

CapitaCommercial Trust is preparing to spend up to S$1.5 billion to convert the Market Street Car Park into an office tower.

Whether the project will go ahead or not depends on feasibility studies, but a major regulatory hurdle has been cleared.

The URA has lifted restrictions for the site, which originally requires the land to be used mainly for car parks.

CapitaCommercial, which owns the car park complex, plans to build a 240-metre-high office tower on the site, with an estimated total gross floor area of 850,000 square feet.

The new project comes despite the building was only renovated in 2006 for some S$14 million.

“We plan to redevelop this into a state-of-the-art Grade A office building to cater to the demand of tenants such as financial and business institutions,” said CapitaCommercial Trust’s CEO, Lynette Leong.

But this redevelopment is subject to conditions.

The trust will have to pay 100 per cent of the enhancement in land value, and will not be allowed to extend the existing lease on the site beyond 2073.

The usual charge is 70% of the enhanced value.

The entire project is estimated to cost between $1 billion and $1.5 billion.

CapitaCommercial Trust says it will study financing options, like a joint venture, business trust or even issuing convertible bonds.

Should the project go forward, the building will be ready in four years’ time, and the trust is optimistic about office space demand then.

Ms Leong noted that recent reports by international property consultants said that office occupancy rate could be between 91% and 95% despite the seemingly large supply of office space by 2012.

She also said: “Demand, from our experience talking to our tenants, is still strong. The take-up at the new MBFC (Marina Bay Financial Centre), recently it has been announced that they’ve got 50% pre-commitment. So, we are still very optimistic of office demand.

“In addition to that, the Singapore economy is still very strong and we are attracting lots of financial institutions and MNCs wanting to set up operations in Singapore, and that’s driving demand for office space.”

The trust says it will give its current tenants at least six months’ notice and help them in relocating to other spaces within its portfolio. – CNA/ir

Source : Channel NewsAsia – 3 Jan 2008