ESR-REIT Begins $28M Redevelopment of Northern Singapore Industrial Asset

ESR-REIT has launched a S$38.5 million ($28.2 million) redevelopment of an industrial property in northern Singapore, with the SGX-listed trust creating a new facility on the site to the specifications of its existing tenant, Dutch manufacturer NTS.

The two-phase project will convert the existing 1993-vintage complex into a high-specification asset expected to achieve a gold certification under Singapore’s Green Mark rating system for sustainable buildings, with phase one to be completed in the first half of 2023 and phase two by the first quarter of 2024, the manager of ESR-REIT said in an announcement to the stock exchange on Tuesday.

“The redevelopment not only strengthens our relationship with NTS but is a testament of our commitment to provide business space solutions to grow with our tenants as they expand their footprint,” said Adrian Chui, chief executive and executive director of the manager. “It also demonstrates our dedication in achieving organic growth by converting old and dated general industrial properties into high-specifications assets that are relevant to today’s industrialists.”

The upgrade plan for the facility in Singapore’s Woodland Industrial Estate was announced less than one month after unitholders in the industrial trust approved a merger with ARA Logos Logistics Trust which, when completed, will see the combined entity total assets of approximately S$5.4 billion ($3.96 billion) across Singapore and Australia.

Ready for Revamp

The announcement of the redevelopment plan for 21B Senoko Loop was published the same day that ESR-REIT notified the stock exchange that its merger with ARA Logos Logistics Trust is expected to be formally completed on 21 April, with the merged entity to be known as ESR-Logos REIT.

With the corporate takeover task soon to be settled, the manager of the trust can turn its attention to knocking down the existing 195,823 square foot (18,193 square metre) development located close to the Seletar Expressway and Bukit Timah Expressway.

The redevelopment provides ESR-REIT and its successor the opportunity to repurpose the 80,241 square foot site for the remainder of its 31.1-year land tenure, according to the manager’s statement.

With the site allowing for only minimal increase in gross floor area to 199,378 square feet post-redevelopment, ESR-REIT’s development team is adding value by improving capacity and efficiency.

The new structure will have a ground floor loading capacity of 15-20kN per square metre and upper floor loading of 7.5 to 12.5kN per square metre. The floor to ceiling height for the ground floor will be 10 to 15 metres while the upper floors will reach approximately 5 to 7 metres in height.

To bring the facility in line with sustainability targets, the team will install low-emissivity glass and window panels, water-efficient fixtures, recycling facilities, energy-efficient air-conditioning and an intelligent motion sensor lighting control system which will allow the tenant to operate within an environmentally sustainable workplace and adopt energy saving practices.

The current master tenant, NTS, specialises in complex mechatronics assemblies and manufacturing of high-accuracy frames and sheet metal for the high-tech industry. Under the terms of the redevelopment, the property will be leased to NTS for 15 years with annual rental escalations on a triple net basis, meaning the Dutch firm will be fully responsible for the payment of utilities, maintenance expenses, property tax and land rent.

Long-Term Asset

ESR-REIT’s predecessor, Cambridge Industrial Trust, had first acquired 21B Senoko Loop in December 2007 for S$14.7 million, with the project then leased back to former owner Tellus Marine Engineering for seven years.

After the completion of that lease period, Cambridge Industrial Trust had taken on an asset enhancement initiative in 2014 that added the four-level warehouse and a detached single-level workshop to the property.

The overhaul will give ESR-REIT nine high-specification assets in its portfolio, representing 18.4 percent of total valuation. The trust wholly or partly owns 56 properties across Singapore, with a total gross floor area of 15.3 million square feet and an aggregate property value of S$3.2 billion.

Following the merger with ARA Logos Logistics Trust — which came about after ESR-REIT’s sponsor, Hong Kong-listed ESR Group, struck a $5.2 billion deal to acquire ARA Asset Management and its Logos subsidiary last year — ESR-Logos REIT is expected to be one of the 10 largest Singapore-listed REITs, with 87 properties in its portfolio.

ESR-REIT also holds a 10 percent interest in ESR Australia Logistics Partnership, a private fund comprising 36 predominantly freehold Australian logistics properties.

Upgrades in Vogue

With occupiers demanding more modern and efficient industrial facilities, ESR is taking action to provide upgrades.

The logistics giant announced this month that it was teaming up with US fund manager PGIM Real Estate to invest $100 million in developing a build-to-suit warehouse in western Singapore under a sale-and-leaseback agreement with Japanese beverage maker Pokka.

The partners will develop a sustainable five-storey warehouse, incorporating a rooftop solar facility, to replace the ready-to-drink coffee and tea producer’s current one-storey building on the site at 4 Benoi Crescent.