The Arcade at Raffles Place to be put up for collective sale for S$780 million – prestigious business address at the heart of Singapore’s financial district is an exclusive opportunity to create a new focal point of commerce and lifestyle in the CBD

Image: Colliers International

Colliers International announced on June 3rd that The Arcade at 11 Collyer Quay in District 1 will be put up for collective sale via tender for S$780 million.

The reserve price for The Arcade of SGD780 million translates to an estimated land rate of SGD2,833 per square foot per plot ratio (psf ppr).
The 20-storey office and retail property sits on a 2,035.4 square metre (approx. 21,909 square feet) site with a 999-year land tenure (effective from 20 April 1826).

Under the Draft Master Plan 2019, The Arcade site is zoned Commercial with a Gross Plot Ratio of 15. Subject to relevant approvals, the site could potentially be redeveloped into an integrated development, comprising a hotel, residential units, office and retail space.

Tang Wei Leng, Managing Director at Colliers International, said, “This is a golden opportunity to lay claim to a historic site in an ever-evolving Raffles Place, the heart of Singapore’s bustling commercial district. The Arcade is a landmark site that has borne witness to the remarkable transformation of Singapore and its economy over the past 50 years. Developers will now get the rare chance to redevelop the site – creating a new focal point of interest – and reshape the Singapore city skyline.”

Given its prime location in the city centre, proximity to wide-ranging amenities, and excellent transport connectivity, the site boasts great potential for the development of a mixed-use project. The developer could potentially redevelop the site to offer a 50-storey iconic, modern skyscraper, with panoramic views of the Marina Bay, and spectacular skyline of the new Downtown.

The site enjoys prominent dual frontage onto Raffles Green – a popular gathering place of executives and professionals in Raffles Place – as well as Collyer Quay, a main arterial road that connects to other parts of Singapore. It is also well-served by public transport with convenient access to the Marina Coastal Expressway, Pan Island Expressway and other major expressways. Additionally, the site has immediate access to the Raffles Place MRT interchange station, which connects the East-West and North-South Lines.

According to a report by PWC and the Urban Land Institute, Singapore now offers the best real estate investment prospects in the Asia Pacific region. The Emerging Trends in Real Estate Asia Pacific 2020 report noted that sentiment for Singaporean assets has rebounded. It added that the office sector has largely absorbed the oversupply, and with vacancies at an all-time low and limited supply in the pipeline, confidence in medium-term prospects has returned.

Ms. Tang previously said, “Global capital continues to seek quality assets in safe gateway cities. We expect investor interest in Singapore commercial real estate to remain robust, owing to the country’s position as a global financial hub, its stable political environment, and pro-business policies. Within Raffles Place, there are probably no other redevelopment opportunities and we believe The Arcade site, with a 999-year land tenure, will be highly sought-after.”

The Arcade is surrounded by many prominent buildings – including Ocean Financial Centre, Republic Plaza, One Raffles Place, OUE Bayfront and the upcoming CapitaSpring – which house renowned financial institutions and large corporations. A myriad of retail and dining options are also within easy reach in the Raffles Place area as well as the nearby Boat Quay leisure and entertainment hub.

Currently, The Arcade comprises 127 office and retail units. Depending on the size of their property, each owner could stand to receive between SGD700,000 and SGD29.9 million from the successful sale of the development.

The collective sale tender for The Arcade will close at 3pm on 7 July 2020.

This is the second time that The Arcade has come up for collective sale. When it was first listed for en bloc sale in November 2019, Mr. Moeez Hatim Nakhoda, Chairman of The Arcade Collective Sale Committee, said, “The Arcade has a fantastic location in the heart of the CBD. It is highly visible and attracts heavy pedestrian traffic. Unfortunately, the building is ageing and fallen behind the times. As Raffles Place continues to evolve and surrounding buildings undergo revamp, the owners feel that it is time that The Arcade gets a complete makeover as well.”

The previous collective sale tender for The Arcade closed on 8 January 2020.

With the winding down of the success of residential en bloc sales, commercial properties are now trying to join in the bandwagon but the Covid-19 pandemic makes such deals even more difficult. Many commercial en bloc sale attempts fail because the asking prices are often too high. Two critical factors affecting the success of commercial sites going en bloc are pricing and location. Older commercial buildings especially, may see a need to catch the current wave as an exit strategy as their rental yields come under pressure due to competition from newer commercial buildings.

One report said investors looking for alternatives to park their money in the wake of property cooling measures, would divert their attention to the strata office and shophouse markets as they are not subjected to this round of purchase or sales restrictions/encumbrances.

Mr Paul Ho, chief mortgage officer at iCompareLoan, said: “The Arcade is a very prominent location in the very heart of District 1. As such, it will appeal to a lot of savvy investors.”

He added, “Even with the global economic uncertainties, Singapore remains an attractive location for investments to flow into, and properties like The Arcade are prime real estates worthy of investment.”

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Additional Loan and Cashflow Support for Landlords and Businesses Affected by COVID-19

The Ministry of Finance (MOF), the Inland Revenue Authority of Singapore (IRAS), Enterprise Singapore (ESG), and the Monetary Authority of Singapore (MAS) announced on June 3 a package of measures to support businesses affected by Covid-19 and landlords that may face cash flow constraints as a result of providing relief to tenants as proposed under the COVID-19 (Temporary Measures) (Amendment) Bill (“COVID-19 Amendment Bill”).

This package of measures will help landlords and businesses affected by Covid-19 with their existing loan commitments, and ease their cashflow needs. The new measures complement relief measures announced by MOF, MAS and the financial industry earlier. The infographic in the Annex provides an overview of the suite of relief measures that are available to landlords.

Enhanced Credit Reliefs for Landlords and Businesses Affected by COVID-19

MAS has worked with the banks and finance companies to enhance the current relief measures for landlords affected by the Covid Amendment Bill. This follows the announcement by the Ministry of Law on rental relief measures that will be tabled in Parliament under the COVID-19 Amendment Bill.

Landlords who are individuals (“individual landlords”) and are current in their loan repayments as at 1 February 2020 can defer both principal and interest repayment up to 31 December 2020 if they are required under the COVID-19 Amendment Bill to provide their tenants rental waivers or payment rescheduling. Individual landlords who successfully apply for a reduction in rental waivers on the grounds of financial hardship are also eligible for this relief measure. Interest will accrue only on the principal amount deferred and no interest will be charged on the deferred interest payments.

Individual landlords can also opt to extend the loan tenure by up to the corresponding deferment period to ease monthly instalments when they resume regular repayments. Their credit scores will not be affected when they take up payment deferments.

As with the previous industry support packages, the enhanced relief measure for individual landlords will be provided on an opt-in basis. As payment deferments and loan tenure extensions will result in higher overall interest costs, borrowers should carefully consider the additional interest costs they will eventually have to bear, and balance this against their need for cashflow relief.

When applying for the relief, individual landlords should submit to their bank and finance company: i) a copy of IRAS’ notice of cash grant; ii) the relevant tenancy/lease agreements; and iii) a declaration of the relief to be provided to their tenants. These documents can be submitted via email or other digital channels. Individual landlords may apply for the new relief measure once IRAS begins issuing the notice of cash grant in July 2020. Banks and finance companies will aim to process all applications promptly.

Businesses affected by Covid-19 crisis can already apply to defer principal payments on their commercial and industrial property loans

Landlords who are small and medium enterprises (“SME landlords”) can already apply to defer principal payments on their commercial and industrial property loans. Most of the applications received so far have been approved. Landlords who need additional credit to meet their immediate cashflow needs can apply for loans under ESG’s Temporary Bridging Loan Programme or Working Capital Loan Scheme through their banks and finance companies.

The larger corporate landlords, including real estate investment trusts listed on the Singapore Exchange (S-REITs), are encouraged to approach their banks or finance companies to explore funding solutions to meet their cashflow needs. Some have already requested for payment deferrals or temporary loan covenant waivers, which banks have acceded to.

Banks provided assurance to businesses affected by Covid-19

Banks have provided assurance that there will be no automatic enforcement of loan covenant breaches with landlords as a result of the constraints and requirements imposed on the landlords by the COVID-19 Amendment Bill. Banks will work closely with landlords to address any such loan covenant breaches (e.g. debt service covenant and interest service covenant), such as by granting a waiver of the breach and/or revising the loan covenants to take account of the current circumstances.

Further Extension of Time for Distribution of Taxable Income for S-REITs

MOF and IRAS had announced on 16 April 2020 that S-REITs would have an extended period of up to 12 months from the end of their financial year (FY) 2020 to distribute their taxable income derived in FY2020, to qualify for tax transparency treatment.

In view of the new rental reliefs under the COVID-19 Amendment Bill, MOF and IRAS will further extend the timelines for S-REITs to distribute their taxable income derived in FY2020 and FY2021. For taxable income derived in the FY ending in 2020, S-REITs will have until 31 December 2021 to distribute them; and for taxable income derived in the FY ending in 2021, they will have until 31 December 2021 or 3 months after the end of FY2021, whichever is later, to distribute them.

“Those that want to talk about SME loans, can also talk to loan consultants. Having long term and strategic relationship with various banks, loan consultants would be best placed to help SME owners the best.”

The post Landlords and businesses affected by Covid-19 to get additional support appeared first on iCompareLoan Resources.