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Finnish marine group puts up five industrial properties for sale

Two of Wartsila's properties - at Pandan Crescent and Benoi Crescent - will be sold on sale-and-leaseback basis
Tuesday, September 20, 2016 - 05:50
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Two properties located at 11 Pandan Crescent and 14 Benoi Crescent will be sold on sale-and-leaseback arrangements, while the other three properties at 43, 45 and 47 Gul Drive are offered on an outright sale basis with vacant possession upon completion of sale.

Singapore

AS part of its global exercise to go asset-light, Wartsila Singapore - the Singapore unit of Finland-listed marine and energy player Wartsila - is putting up five industrial properties here for sale via an expression of interest (EOI).

Two properties located at 11 Pandan Crescent and 14 Benoi Crescent will be sold on sale-and-leaseback arrangements, while the other three properties at 43, 45 and 47 Gul Drive are offered on an outright sale basis with vacant possession upon completion of sale.

The indicative asking prices for 11 Pandan Crescent and 14 Benoi Crescent are S$40 million and S$11 million respectively, according to Cushman & Wakefield, the exclusive marketing agent for the sale.

Subject to the terms of the sale- and-leaseback contract, Wartsila is open to the possibility of leasing back the property at 11 Pandan Crescent for the entire balance lease of 18 years.

"We envisage that the sale and leaseback of 11 Pandan Crescent and 14 Benoi Crescent are likely to attract strong interest from third party facility providers such as Reits as well as qualified developers and fund managers who are looking for high-yielding assets with strong tenant brand name and stable income to add to their existing industrial portfolio," Cushman & Wakefield executive director for capital markets, Shaun Poh, said.

"Both properties have considerable amount of unutilised plot ratio," he added. "On a per square foot basis, indicative prices for both properties are well in line with the recent transactions for similar properties with comparable balance land lease tenure, in the respective localities."

There are also considerable unused plot ratios for the three properties at 43, 45 and 47 Gul Drive, which will appeal to end-users for their strategic business relocation or expansion plans, Mr Poh said.

The asking prices for 43, 45 and 47 Gul Drive, where three semi-detached factories now occupy the continguous land plots, are S$8 million, S$6.4 million and S$5.7 million respectively, or S$230-S$288 per square foot (psf) on existing floor area.

There is potential to amalgamate the plots for larger scale business operations, subject to approval from relevant authorities, Mr Poh pointed out.

Wartsila Singapore is consolidating all its business operations here into 11 Pandan Crescent and 14 Benoi Crescent.

A spokesman from Wartsila Singapore told BT that this consolidation is in line with the asset-light strategy globally and is aimed at improving operational efficiency. So far, its headcount in Singapore has remained stable, notwithstanding headwinds in the oil and gas sector.

Most of Wartsila Singapore's operations are currently located at 11 Pandan Crescent and 14 Benoi Crescent. Engine servicing, overhauling, repairing and reconditioning of marine engines are done in the workshops at 11 Pandan Crescent, while its design works, assembly and manufacture of diesel engines, and storage of equipment and spare parts are housed at 14 Benoi Crescent.

Post-transaction, Wartsila Singapore plans to work with the buyer to undertake additions and alterations to improve the facilities and maximise their plot ratios. It intends to spend S$20 million and S$6 million respectively to upgrade and expand the facilities at 11 Pandan Crescent and 14 Benoi Crescent, Mr Poh told BT.

The semi-detached factory at 47 Gul Drive is currently leased to Allbest Marine Engineering Pte Ltd, a provider of corrosion prevention and tank coating services which is slated to move out of the premise.

Under the EOI exercise, prospective buyers can express their interest for either one or a combination of these properties.

Set up in 1982, Wartsila Singapore now employs over 1,000 professionals. Globally, Wartsila's net sales grew 5 per cent to five billion euros (S$7.5 billion) last year, of which 97.8 per cent was derived from outside Finland. Singapore accounted for 3 per cent of group net sales, according to its website.

Globally, its management has guided for a 0-5 per cent growth in net sales for this year and profitability (comparable operating result as a per cent of net sales) to be 12.5-13 per cent.

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