MULTI-MILLION-DOLLAR plans are underway to increase the net lettable area at Raffles City, say new owners CapitaMall Trust (CMT) and CapitaCommercial Trust (CCT).
In March, the trusts agreed to pay $2.1 billion for the complex which includes an office tower, hotels and a retail mall. CCT and CMT will now pump in between $64-86 million to create up to 200,000 sq ft in additional net lettable area (NLA).
In statements released yesterday, CCT and CMT said the estimated net increase in rent due to the increased retail NLA is expected to range between $10-15 per sq ft per month. This is expected to translate into a net increase in gross rental income of about $18-36 million per annum. Assuming an operating margin of 70 per cent, the estimated increase in net property income could be between $12.6-25.2 million per annum.
The new owners also expect the ungeared return on investment to be between 20-29 per cent.
About 2.2 million people visit the retail component of Raffles City every month already. CCT and CMT now hope to further strengthen the retail offering at Basement One and create two additional levels of retail space at Basements Two and Three of Raffles City. This will take advantage of an intended link to the proposed Esplanade MRT station on the Circle Line MRT system targeted for 2010. There is also a possibility of constructing a link which could provide direct access from the City Hall MRT station.
The retail component of Raffles City, which takes up about 15 per cent of the complex, is expected to contribute 43 per cent of the net property income. The required additional gross floor area (GFA) can be derived from either hotel commercial GFA, office GFA, or other commercial GFA.
The completion of the Raffles City acquisition is targeted for Sept 1.
The two trusts will sell $866 million of bonds to help fund its purchase. It is understood that HSBC Holdings will be marketing the bonds, which are also backed by Raffles City, in Hong Kong, London and Frankfurt.
Standard & Poor’s rating services said it has assigned a preliminary credit rating of ‘AAA’ to a $670 million portion of the bonds. The other two parts - a $60 million and a $136 million portion - were not rated.
Source : Business Times - 22 Aug 2006
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