Suntec – BT

It makes sense for Suntec Reit to divest Chijmes

BT WEEKEND recently reported that Suntec Real Estate Investment Trust has appointed a property agent to handle an expression of interest exercise for the sale of Chijmes, an iconic conservation development at Victoria Street that houses within it two national monuments.

Whether Suntec actually sells the asset will depend on whether it can make a nice profit from it. The asset was valued at $134 million at the end of last year, higher than the $128 million Suntec paid for it in late 2005.

Back then, Suntec spoke about potential for asset enhancement, synergy with the Reit’s Suntec City Mall and Park Mall, and scope for ‘organic growth’ within the portfolio.

But five to six years on, Suntec could have found it challenging to do all these. After all, there are a lot of restrictions unique to a conservation property. Chijmes Hall (the former CHIJ chapel) and Caldwell House are gazetted national monuments. Suntec would have found it requires a lot of effort on this property, and the returns may not be commensurate.

Back in 2005, Suntec was hungry for assets. It had just bought Park Mall opposite Dhoby Ghaut MRT Station from Wing Tai for $230 million, while another deal to buy 11 properties from City Developments for $788 million was in the midst of coming apart.

Today, Suntec has a much bigger office portfolio, having acquired one-third stakes in One Raffles Quay and Marina Bay Financial Centre (the latter at $1.496 billion late last year). Last month, the trust raised its effective stake in Suntec Singapore International Convention & Exhibition Centre to 60.8 per cent.

Chijmes, a somewhat dated retail and entertainment development, seems less and less important in Suntec Reit’s portfolio. Suntec may not find it worth its while to devote more resources to spruce up the asset, which certainly needs some rejuvenation. But there could be other parties that may find Chijmes appealing.

Despite the current weaker property investment climate among institutional investors such as property funds against the backdrop of global economic uncertainty, there is no dearth of private wealth and sovereign wealth funds (SWF) looking for a place to park their monies, especially in a relatively safer place such as Singapore. Raffles Hotel, diagonally opposite Chijmes, belongs to one such SWF, Qatari Diar.

Who knows, Chijmes could find a new lease of life if part of the space is transformed into a luxury boutique hotel in a charming historic building, taking after the Raffles Hotel on one side and the future luxury hotel coming up on levels two to four of Capitol Building and Stamford House, on the other side. And both are also conserved properties.

More facilities may need to be incorporated and, of course, the permission of the authorities, including the Urban Redevelopment Authority (URA), would have to be secured first.

Some well-heeled educational institutions may also find value in buying Chijmes with the intention of using it as a campus – again assuming URA approves such use for the site. This would return the grounds to their original use and would go well with the presence of Singapore Management University and National Library nearby.

And who knows, a church may end up holding weekend services at the old chapel on the former convent grounds with multimedia link-up to the classrooms.

The prospects for extracting greater value from a historic property such as Chijmes may appeal to many investors. But perhaps Suntec Reit may have set its sights on new acquisitions in the segments of the property market where it has been more successful. The cash and other resources released through the sale of Chijmes could also come in handy against a weakening global economic climate.