Gaping vacancies among Ngee Ann City offices

Monday, Jun 23 2014 04:10 PM

(SINGAPORE) Right in the heart of the city, some high-quality office space is going abegging.

268 Orchard Rd: Ngee Ann Development could be close to redeveloping the former Yen San Building which it bought from CapitaLand in 2004 for $135m. It has permission to build a 12-storey commercial building with a basement level.

Slightly more than 20 per cent of the space owned by Ngee Ann Development (NAD) in Ngee Ann City's office towers on Orchard Road is believed to be vacant.

NAD owns all of the office space in Ngee Ann City's office Tower A as well as some floors in Tower B. It is estimated to own about 340,000 sq ft or about 70 per cent of total office space at Ngee Ann City.

The vacancy rate of 20 per cent is probably the highest in an office building in the Orchard Road area. What's more, this does not even include one and three quarter floors in Tower B leased to Autodesk Asia, which has moved to Fusionopolis but continues to have a running lease until early next year.

Market watchers suggest there may be restrictions on subtenancy in Autodesk's lease agreement that could have made it difficult for Autodesk to find a replacement tenant. If this space were to be included, close to 30 per cent of the space owned by NAD in Ngee Ann City could be considered physically vacant.

In contrast, within the same complex, the vacancy figure for the 140,188 sq ft that Starhill Global Reit owns in Tower B is much lower. At end-June 2010, it stood at just 4.4 per cent.

The Reit's property manager is said to be signing office leases at below $9 psf on average whereas NAD's space is understood to be transacting at about $9 psf average.

NAD itself is 73.7 per cent owned by Ngee Ann Kongsi with Japanese retailer Takashimaya holding the remaining 26.3 per cent.

The company's executive director Teo Chiang Long could not be contacted over the past few days. His daughter, who is marketing and project manager at the company, could also not be reached for comment.

The company occupies Tower A's top two floors.

Industry observers attribute the high vacancy rates for the offices owned by NAD to several factors - the landlord being less pro-active in offering its available office space for listing with property agents compared with other landlords, as well as the company being more selective about tenants and expecting slightly above-market transacted rents.

Separately, a lease is being negotiated for about 29,000 sq ft of space on the seventh and eighth levels of Ngee Ann City's podium where Sparks Disco once was, BT understands. This space, which has been vacant for a while, is also owned by NAD.

The company also owns 268 Orchard Road (formerly Yen San Building), which it bought from CapitaLand in 2004 for $135 million. Citibank was once a major tenant in the 20-storey freehold building, which has been standing empty for the past few years - an eyesore next to the recently opened Grand Park Orchard hotel and its retail podium Knightsbridge, and the Mandarin Gallery across the road.

At one stage, there was talk about potential for a collaboration between NAD and owners of surrounding properties (such as the next door hotel, The Heeren and Wellington Building) to do a joint redevelopment of all the properties. That did not pan out.

NAD could now be close to redeveloping 268 Orchard Road, which is about 37 years old. Sources suggest works to tear down the existing property could begin next month.

In January this year, NAD's fully-owned subsidiary RE Properties received written permission to redevelop the site into a 12-storey commercial building with a basement level. The proposed development scheme will have a total gross floor area of about 183,361 sq ft.

BT understands the plan is to have shops and upmarket restaurants in the new building, which is envisaged as a single block with a step-up design - replacing the current podium-and-tower block format. It is expected to be ready in 2013.

Raymond Woo & Associates Architects is designing the project. The firm also designed Ngee Ann City.

Ngee Ann Kongsi is a Teochew philanthropic foundation. The dividends it receives from NAD are said to be the foundation's main source of income used to fund its educational and other charitable works.

From 1972 to 2006, the Kongsi donated 75 per cent of its income each year to Ngee Ann Polytechnic. Following an amendment to the Ngee Ann Kongsi (Incorporation) Ordinance, which was passed in July 2007, the Kongsi now contributes 25 per cent of its revenues to the polytechnic.

NAD posted group revenue of about $109.8 million, profit before tax of $79.2 million and profit after tax of $64.2 million in 2009, according to records with the Accounting and Corporate Regulatory Authority. The respective figures for the preceding year were $108.2 million, $74.1 million and $60.4 million.

Total assets at the end of financial year 2009 stood at $944.1 million, up from $884.8 million at the end of FY2008. Total liabilities were $39.9 million at end-FY2009, compared with $42.7 million previously. The company's retained earnings grew from $277.7 million at end-2008 to $306.7 million at end-2009.

 

By KALPANA RASHIWALA, September 20, 2010

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