Suntec revamp focus for Reit: deputy CEO

Suntec revamp focus for Reit: deputy CEO
PHOTO: Suntec revamp focus for Reit: deputy CEO

SINGAPORE - The $410 million remaking of Suntec City will be the biggest focus for Suntec Real Estate Investment Trust (Suntec Reit) for the next three years, said its deputy chief executive officer.

"You look at the size itself, you look at what we have to execute and deliver, I think we are going to be very busy making sure this works," said Susan Sim.

But acquisitions are not being ruled out.

"Price must be correct, opportunities must be there," she told The Business Times. The Reit currently owns Suntec City, Park Mall, as well as a one-third interest in One Raffles Quay, Marina Bay Financial Centre (MBFC) Towers 1 and 2 and the Marina Bay Link Mall.

It was reported to have pursued a stake in MBFC Tower 3, which eventually went to DBS Group Holdings in December last year. Suntec City, comprising five office towers, Suntec City Mall and the Suntec Singapore International Convention and Exhibition Centre (Suntec Singapore), has not seen many changes since it began operating in 1995, Ms Sim observed.

The remaking of Suntec City refers to Suntec City Mall and Suntec Singapore.

It would have been easy to not rock the boat, as she pointed to average occupancy rates that never fell below 98 per cent at Suntec City Mall in the past 32 quarters. But Ms Sim believes the retail landscape here is set to evolve and there are opportunities to tap.

This decade should see solid growth in the Marina Bay area, identified as a growth area by planners and which Ms Sim feels can offer more than shopping and hotel-centric Orchard Road, which had been the focus in the 2000s with the opening of malls such as Ion Orchard and 313@Somerset towards the end of that decade.

Besides being a prime office district, Marina Bay also has attractions such as Gardens by the Bay to pull tourists in, Ms Sim said and pointed to upcoming developments such as the $7 billion Marina One project and the South Beach area for growth opportunities in the office, residential and retail segments.

Her optimism also stems from Orchard Road having little space left for new developments.

"I can't see how you can put in more square footage in there," Ms Sim said.

The remaking of Suntec City, thought up in 2010, also allows the "right-sizing" of certain operations and a chance to make Suntec City more relevant.

"The market has gotten more sophisticated; shoppers are more discerning, diners are more discerning," Ms Sim said.For example, such a huge shopping area as was allocated to Carrefour previously was no longer relevant. In the same vein, the six-screen cineplex to be vacated by Eng Wah was insufficient to meet current demands. It was against this backdrop that the Reit decided to revamp its crown jewel.

The asset enhancement initiative (AEI) began in June last year. Distribution per unit (DPU) for the year ended Dec 31 fell 6.2 per cent from a year earlier, with revenue and net property income affected by closures.

"It's painful in the short term, but I think in the long term, when we look at it, we're building for the next 18 years, 20 years," Ms Sim said.

Phase one of the AEI covers the area flanked by Raffles Boulevard, Nicoll Highway and Temasek Boulevard; it will be completed in May. Phase two, which involves the repositioning of the previous Entertainment Centre, should be ready in the fourth quarter this year.

Work for the final phase involves the area spanning Tower 5. It will start in Q4 this year and should be ready by end 2014. Upon completion of the AEI, Suntec City will be better integrated both within itself and with its neighbours, with a new look convention centre and outdoor facade.

Two new floors of retail and entertainment offerings will also be available at Suntec Singapore. The retail concept will also see a change. More high street fashion brands will be brought in together with the likes of Uniqlo and H&M; new cafes will dot the office towers and there will be more entertainment and dining options.

Overall, there will be more retail space for letting out after the AEI. As at the latest results, 83 per cent of net lettable area for phase one of the AEI has been pre-committed, with another 37 per cent pre-committed for phase two.

There will be financial benefits to be reaped. For example, average rents at Suntec City Mall should rise 25 per cent to $12.59 per square foot per month post AEI. The return on investment is expected to be 10.1 per cent.

"So if you talk about numbers, it's very clear," said Ms Sim.

This website is best viewed using the latest versions of web browsers.