Mapletree Industrial Trust to redevelop flatted-factory cluster at Kallang Way

Singapore

MAPLETREE Industrial Trust (MIT) plans to redevelop a flatted-factory cluster at Kallang Way into a high-tech industrial precinct at a total project cost of about S$263 million, in its largest redevelopment project to date.

The proposed redevelopment of the Kolam Ayer 2 Cluster includes a build-to-suit (BTS) facility for a medical device company headquartered in Germany, customised to the firm's specifications and plans, the manager of the mainboard-listed real estate industrial trust (Reit) said on Wednesday.

MIT has sufficient financial capacity to fund the project, the manager added. Assuming the redevelopment is fully funded by debt, the aggregate leverage ratio is expected to increase progressively from 33.8 per cent as at March 31 to 36 per cent upon completion of the project.

The German firm will be the anchor tenant and has committed to lease the BTS facility for an initial term of 15 years, with annual rental escalations and an option to renew for two more five-year terms.

The seven-storey, BTS facility will account for about 24.4 per cent of the enlarged gross floor area (GFA). This will serve as the German firm's Asia-Pacific hub and include facilities for manufacturing as well as research and development.

Subject to approvals from the relevant authorities, construction is expected to start in the second half of 2020 and be completed in two years.

The income contribution from the anchor tenant is expected to be accretive to MIT's distribution per unit.

The manager will also provide an assistance package for the cluster's existing tenants affected by the project.

The cluster at 155, 155A and 161 Kallang Way sits on a land of 346,270 square feet, near the MacPherson neighbourhood.

It comprises two seven-storey, flatted factories and an amenity centre. Flatted factories are industrial buildings with multiple tenants and common facilities such as goods lifts.

The cluster is zoned for Business 2 use, with its land lease tenure of 43 years starting from July 1, 2008.

The redevelopment will increase the utilised plot ratio from 1.5 to 2.5, and increase total GFA to 865,600 sq ft. One of the buildings, with a GFA of 211,000 sq ft, will be developed as the BTS facility. For the other blocks with total GFA of 654,600 sq ft, the Reit manager will target high value-added and knowledge-based businesses from the advanced manufacturing, information and communications technology sectors.

The manager will also pursue opportunities to develop customised spaces for end-users.

The anchor tenant's long-term lease commitment will also provide stable income and increase the MIT portfolio's weighted average lease to expiry, said Tham Kuo Wei, chief executive of the Reit manager.

The S$263 million total project cost includes the development cost of the BTS facility and the S$70.2 million book value of the cluster as at March 31.

The cluster accounted for 1.8 per cent of MIT's gross revenue for the fiscal year ended March 31, 2019.

Under MIT's tenant assistance package, existing tenants at the cluster will receive an extended notice period of 12 months at preferential gross rental rates for their remaining leases. They also do not need reinstate their premises to the original bare condition and will not have to compensate for early termination of their leases.

MIT's manager said it will help all existing tenants to relocate to alternative clusters within MIT's portfolio. It has set aside more than 469,200 sq ft of space at alternative MIT clusters for tenants considering relocation, equivalent to about 1.6 times of the space presently occupied by them. These units will be offered at 7 per cent to 33 per cent lower than the average rental leases for new leases at the alternative clusters.

Mapletree Industrial Trust units closed up 1.33 per cent or three cents at S$2.29 on Wednesday.