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Author: Ravi Philemon
Mapletree Industrial Trust secured pre-commitment for about 24.4% of space for new high-tech industrial precinct at Kallang Way
Mapletree Industrial Trust Management Ltd., as manager of Mapletree Industrial Trust (“MIT”), announced on July 10 that it will be redeveloping the Kolam Ayer 2 Cluster in Singapore into a high-tech industrial precinct at a total project cost of about S$263 million.
The total project cost for redeveloping the high-tech industrial precinct is about S$263 million, which includes the book value of the Kolam Ayer 2 Cluster at S$70.2 million as at 31 March 2019 prior to the commencement of the Proposed Redevelopment.
The proposed redevelopment of the high-tech industrial precinct will include a build-to-suit facility (the “BTS Facility”) for a global medical device company headquartered in Germany (the “Anchor Tenant”). The BTS facility will account for about 24.4% of the enlarged gross floor area (“GFA”) upon completion of the Proposed Redevelopment.
New High-tech Industrial Precinct
Mr Tham Kuo Wei, Chief Executive Officer of the Manager, said, “This is an opportune time for us to embark on the Proposed Redevelopment after successfully securing significant pre-commitment from the Anchor Tenant. The Proposed Redevelopment will unlock value for MIT’s portfolio by repositioning the Kolam Ayer 2 Flatted Factory Cluster as a high-tech industrial precinct and utilising untapped plot ratio.
In addition, the long-term lease commitment from the Anchor Tenant will provide stable income and increase the portfolio’s weighted average lease to expiry. As MIT’s largest redevelopment project to date, this is another strategic step in growing the Hi-Tech Buildings segment.”
Situated on land of approximately 346,270 square feet (“sq ft”), the Kolam Ayer 2 Cluster at 155, 155A and 161 Kallang Way currently comprises two seven-storey Flatted Factories and an amenity centre. With a GFA of about 506,720 sq ft and an utilised plot ratio of 1.5, the cluster is zoned for Business 2 use with its land lease tenure of 43 years commencing from 1 July 2008.
Located within the Kolam Ayer Industrial Estate, the new high-tech industrial precinct at Kallang Way is close to the MacPherson neighbourhood and a short drive to the Central Business District. It is well-served by the Central Expressway, Kallang-Paya Lebar Expressway and Pan Island Expressway as well as the Geylang Bahru Mass Rapid Transit station. It enjoys prominent frontage along the Pan Island Expressway.
The Proposed Redevelopment of the Kolam Ayer 2 Cluster into a high-tech industrial precinct will increase the utilised plot ratio from 1.5 to 2.5. Upon completion of the Proposed Redevelopment, this will increase the total GFA to about 865,600 sq ft. One of the buildings with GFA of about 211,000 sq ft will be developed as a BTS Facility for the Anchor Tenant.
Building on the successful leasing of the recently completed greenfield industrial development at 30A Kallang Place, the Manager will target high value-add and knowledge-based businesses from the advanced manufacturing, information and communications technology sectors for the other blocks with total GFA of about 654,600 sq ft.
Mr Tham said, “Given its excellent connectivity to the public transportation network, the new high-tech industrial precinct has the potential to cater to companies seeking build-to-suit solutions. It will be a choice location for firms looking for high-quality industrial space at the city fringe.”
The total project cost of the Proposed Redevelopment, including the development cost of the BTS Facility, is expected to be around S$263 million. The Proposed Redevelopment, which is subject to approvals from the relevant authorities, is expected to commence construction in the second half of 2020 and complete in the second half of 2022.
BTS Facility for a Global Medical Device Company
The Anchor Tenant is a global medical device company headquartered in Germany. The seven-storey purpose-built development will serve as the company’s new central hub in Asia Pacific, which include facilities for manufacturing as well as research and development.
Upon the completion of the BTS Facility, the Anchor Tenant is committed to fully lease it for 15 years with annual rental escalations as well as an option to renew for two additional five-year terms. This includes a rent-free period of six months distributed over the first six years. The Anchor Tenant will be responsible for the payment of all operating expenses and property tax of the BTS Facility. Shortlisted units within MIT’s portfolio for tenants at the Kolam Ayer 2 Cluster.
Support for Existing Tenants at Kolam Ayer 2 Cluster
A comprehensive Tenant Assistance Package has been put together for the existing tenants at the Kolam Ayer 2 Cluster. Tenants will be offered an extended notice period of 12 months at preferential gross rental rates for their remaining leases at the Kolam Ayer 2 Cluster. They will not be required to reinstate their premises and will not need to compensate for early termination if they choose to move out prior to the expiration of their leases.
All tenants at the Kolam Ayer 2 Cluster will be informed of the Proposed Redevelopment and the Manager will actively help them relocate to alternative clusters within MIT’s portfolio. More than 469,200 sq ft of space at Alternative MIT Clusters 3 has been set aside for tenants considering relocation. This is equivalent to about 1.6 times of the space presently occupied by the tenants.
Premises at Alternative MIT Clusters will be offered at discounted gross rental rates for new three-year leases. These are about 7% to 33% lower than the average rental rates for new leases at the respective clusters. Rent-free periods and longer fit-out periods of up to nine months, as well as cash subsidies of up to 16 months of gross rents at the Alternative MIT Clusters will be given to tenants who choose to relocate to Alternative MIT Clusters.
Tenants who do not take-up a new lease at an Alternative MIT Cluster will also be given a cash subsidy equivalent to six months of gross rent based on preferential gross rental rates. MIT’s Tenant Assistance Package is put together to offer viable options for tenants planning to relocate their businesses. With a diverse portfolio of properties strategically located across Singapore, MIT has sufficient space to facilitate their relocation.
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