BT : Stanchart to lighten up, CCT gears up for $92m improvement

Business Times - 28 May 2010

Stanchart to lighten up, CCT gears up for $92m improvement

Bank gets ready to give up some space at Six Battery Road when lease expires next year

By KALPANA RASHIWALA

STANDARD Chartered Bank will be vacating about 70,000 sq ft at Six Battery Road when its lease at the building runs out next year. However, the bank will retain its remaining space of 129,000 sq ft in the building on which the lease expires in 2020. The latter space is understood to include the banking hall.

The building's owner, CapitaCommercial Trust (CCT), has already identified prospective tenants to take up the space Stanchart will be vacating, and will take advantage of the transitional downtime in occupancy during the changeover of tenants to execute a $92 million asset enhancement at the building, which will be done in phases from October this year to 2013 to minimise inconvenience to tenants.

Earlier this week, Six Battery Road was awarded the Building and Construction Authority's Green Mark Platinum award, the first time an operating office building here has won the highest Green Mark accolade. The award has been conferred for the proposed environmentally sustainable features CCT is implementing as part of the asset enhancement works for the 42-storey building. The Grade A office property contributed 22 per cent of CCT's net property income in Q1 this year and 'the asset enhancement ensures this robust income continues from this asset', said Lynette Leong, CEO of CapitaCommercial Trust Management Ltd (CCTML).

'We believe that market rents have reached a trough and we're positioning this asset for the recovery of the market and we believe this is an opportune time to undertake asset enhancement so that it will continue to offer value-for-money office accommodation to tenants and sustain the building's high occupancy and rental rates,' she added.

CCTML is projecting a return on investment of 8.1 per cent on a stabilised basis for the $92 million asset enhancement works based on incremental annual net property income of $7.4 million once the works are completed. A fifth of the increase in income will arise from cost savings due to improved operating efficiency, while the other 80 per cent will be from higher rental projection. CCTML expects rents in the building to appreciate 10-15 per cent arising from superior specifications following the upgrade.

The increase in value of the building (net of the investment cost) is projected at about $82.9 million when the works are completed at end-2013. Six Battery Road was valued at $1.114 billion at end-2009. CCT will fund the asset enhancement from internal cash resources.

The upgrading works will kick off in October with the ground-floor lift lobby, turnstiles and reception area. Other planned works include redesigning of the chiller plant room system, incorporating a thermal energy storage system which will improve efficiency. The onyx wall in the main lobby will make way for the largest 'green' wall with living plants in a Singapore office building. This will help reduce indoor heat gain; the onyx will be reused in other parts of the lobby.

Rainwater will be harvested to irrigate the green wall. Exhaust air will be used to power a wind turbine that will in turn power the green wall's irrigation pumps and lighting. To nudge tenants to use cleaner emission vehicles, CCT will set aside carpark lots for hybrid cars.

The canopy at the building's entrance will be extended to cover the entire length of the drop-off area. For lettable areas, CCT will raise ceiling height from 2.6 metres to 2.8 metres and install variable air volume box and carbon dioxide sensors to improve indoor air quality. But these works will be done only for units for which leases have expired, before new tenants move in. The intention is to tie the upgrading of interior office spaces with the natural lease expiry profile. Six Battery Road received Temporary Occupation Permit in 1984 and was last retrofitted in 2000 at a cost of about $37 million.

The space to be vacated by Stanchart covers six to seven floors and CCTML's plan is to upgrade the interiors of this space before leasing it out to other tenants.

The 70,000 sq ft that Stanchart will be giving up represents 14 per cent of the building's net lettable area of 496,851 sq ft and 2 per cent of the 3.3 million sq ft total net lettable space in the trust's portfolio.

Stanchart's two main premises will be at Marina Bay Financial Centre (which it will start to move to by Q4 2010) and Changi Business Park (which it has already moved into). However, Stanchart will continue to house its flagship branch at Six Battery Road. Some consumer banking and group functions will also remain at this location, a Stanchart spokesman said.

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