Tuesday, July 3, 2012

» NOL to sell headquarters in Alexandra Road


Straits Times: Tue, Jul 03

NEPTUNE Orient Lines (NOL) is putting the Alexandra Road building that houses its headquarters up for sale to free up capital.

Although the container shipping giant has found itself in dire straits recently, amid a global industry downturn, analysts say the move does not appear to be an act of financial desperation.

NOL said yesterday in a statement that it intends to sell its 29-year-old HQ 'to release capital for strategic investment'.

NOL added it 'has not decided on a reserve price' for the freehold commercial building.

It will decide whether to relocate the 500 or so employees who work there, or remain in the existing building as a tenant, only after a buyer is identified, it added.

The 26-storey tower is at 456 Alexandra Road, and will be marketed by Jones Lang LaSalle.

The NOL Group occupies 90 per cent of the building, and is expected to lease back the premises, Jones Lang LaSalle said in a statement.

The building is on a 108,060 sq ft site zoned for commercial use. It has a gross floor area of 294,500 sq ft and an existing net lettable area of 207,505 sq ft.

R'ST Research director Ong Kah Seng said: 'If a sale and leaseback option is considered, the building sale price could be about mid-$1,000 per sq ft (psf), or in excess of it, and likely to be up to about $1,700 psf.'

This estimate is based 'on possibilities of long leases of gross rents of about $6 psf per month from the nearer term - depending on prevailing market conditions and enhancement costs on the building's addition and alteration works', Mr Ong said.

Based on the net lettable area, this values the tower at up to about $353 million, with a rental of around $1.25 million a month.

This is the second time that NOL is selling the building.

It was sold for $185 million in 1998, in Singapore's first asset-backed securitisation deal, to special-purpose vehicle Chenab Investments.

But NOL bought it back, a spokesman said.

NOL has been in the red for five straight quarters, hit hard by the double whammy of high fuel costs and low freight rates.

It said in May that it was on track to save US$500 million (S$637 million) in total this year, and was undertaking an organisational restructuring that would result in additional annual savings of about US$70 million from next year.

But analysts cautioned against interpreting NOL's intended sale as a last-resort measure or sign of desperation.

'Although it might have negative connotations from a public relations perspective, quite a few brand-name companies like PSA Corp also do not own their HQ buildings (PSA's is now owned by MapleTree Commercial Trust). And PSA is a company that has been doing well,' Maybank Kim Eng analyst Bernard Chin said. 'So this could just be one of the few options NOL is exploring to raise capital.'

Another analyst, who declined to be named, said NOL was 'actually very well funded... they are not in urgent need of cash'.

'They're just releasing capital that is otherwise trapped... I think they wouldn't mind leasing the building back and using the money to build their business elsewhere, like logistics.'

Mr Ashish Manchharam, head of investments for South-east Asia at Jones Lang LaSalle, said that the sale of the building was an 'opportunity for buyers to refurbish or redevelop the property, because it's quite an old building now'.

He added in a statement: 'Large commercial freehold opportunities of this nature rarely come to the market, and we expect strong interest in the NOL Building through this sale campaign.'

It is up for sale through an expressions of interest campaign closing by the middle of next month, Jones Lang LaSalle said.

Other companies that had sold their HQs and leased them back include Osim, which sold its Ubi HQ to Ascendas Real Estate Investment Trust nearly a decade ago.


GOLDEN CHANCE

Large commercial freehold opportunities of this nature rarely come to the market, and we expect strong interest in the NOL building through this sale campaign.

- Mr Ashish Manchharam, head of investments for South-east Asia at Jones Lang LaSalle

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