United Industrial Corporation

Mainboard-listed United Industrial Corporation is poised to buy the remaining 21 per cent of UIC Building that it does not already own under a collective sale that could value the ageing leasehold Shenton Way office block at about $630 million, say market watchers.

This pricing works out to about $900 psf of potential gross floor area inclusive of a total of around $180 million payable to the state for development charges and upgrading the site’s lease to 99 years from the current remaining term of about 61 years.

UIC Building, which is being marketed by CB Richard Ellis, is understood to have earlier attracted three bids - from City Developments, Wing Tai and UIC itself - in an expression of interest exercise which closed on Feb 8.

Analysts reckon that UIC would be in a better position to pay a higher price to the other owners as, unlike rival developers, its outlay will be lower since it already owns 78.8 per cent of the building. UIC is controlled by Singapore’s Wee Cho Yaw and Philippine tycoon John Gokongwei.

‘For UIC to be in talks with other owners to buy the building through a collective sale, its latest offer must be higher than the top price indication achieved during the expression of interest,’ said a real estate market watcher.

‘And as UIC already owns 78.8 per cent of share values in the development, it’s probably going about the collective sale carefully, being mindful of the minority owners and ensuring that the sale process is handled in a transparent way - to minimise hiccups later when an application is made to the Strata Titles Board,’ he added.

Under Master Plan 2003, the 72,960 sq ft site is zoned for commercial use with an 11.2+ plot ratio and qualifies for a 10 per cent bonus plot ratio. The site has a 35-storey height limit. The maximum potential gross floor area works out to 898,867 sq ft inclusive of the bonus plot ratio.

Despite the current shortage of office supply on the island, market watchers reckon the best and highest redevelopment use for the UIC Building site would probably still be residential, rather than office.

This is because a residential development will be able to achieve a higher efficiency (ratio of net saleable area to gross floor area) and lower construction/ interest costs.

Any redevelopment will be subject to approval from the authorities, including the Urban Redevelopment Authority.

A full-residential redevelopment scheme could result in about 600 units averaging 1,500 sq ft being built on the site, or 750 apartments assuming a smaller average unit size of 1,200 sq ft.

Property consultants reckon a realistic selling price to assume for a new condo project on the UIC site, given the substantial number of units involved and the fact that the site is not next to the popular Marina Bay, could be about $1,500 psf on average.

Factoring in profit margins for the developer and rising construction costs, the land price works out to about $900 psf of potential gross floor area.

When an expression of interest exercise was conducted in late December, the asking price bandied was ‘over $830 million’. However, this was probably the price agreed with the sales committee based on owners’ expectations of a price of $2,000 psf for their respective existing strata areas in the building (the building has about 415,000 sq ft existing strata area) - rather than an evaluation of what price the market can support for a redevelopment scheme.

Source: The Business Times, 10 April 2007