BUY S$1.30 STI : 2,743.58
Price Target : 12-Month S$ 1.69
UBS renews lease at Suntec. UBS is understood to have renewed its lease for about 150,000sf at Suntec Tower 5 for three years. The bank is currently occupying the entire top two floors of the 18-storey Suntec Tower 5, as well as parts of several other floors in the tower, which has net lettable area of 28,000sf per floor. The lease at Suntec was due to expire sometime in the first quarter of next year.
Estimated rents in line with recent transaction for large spaces. Market estimates that UBS could be paying around $7-8psf a month to renew their lease, which is slightly lower than the recent transacted rents at around S$9 psf pm in the area but we think this is in line with the recent transacted and renewal rents for large space at around $6-9 psf pm.
Early lease negotiation, a smart move in view of the upcoming supply. We view Suntec reit's strategy to forward lock in tenant as a positive move in view of the uncertainty on the global macroeconomic. As at June 2011, the trust has about 74,313sf and 449,023sf of offices leases expiring in FY11 and FY12 respectively. Tying UBS's lease, which represent 30% of next year's expiring NLA, will mean that the trust will have a smaller tranche of leases to renew going into next year. We understand from management that they will continue to carry out early negotiations for some of the other tenants progressively. The group proactive efforts in lease management will help to minimize downside risk to Suntec's occupancy which is currently at a high of 99.5%. Maintain BUY with TP S$1.69.
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