It's stunning that plans by CapitaCommercial Trust to redevelop the Market Street carpark - for the second time in just two years - isn't drawing more questions from shareholders. Having spent millions just a year ago to spruce it up, they are now planning to tear it down and build an A-grade office complex on it. While the motivation itself is raising questions of analysts, the question we're asking is why no one is jumping up and down about the apparent waste of money.

On November 7, 2006, CCT announced with much fanfare the reopening of the Market Street Convenience Hub. It had spent S$14 mln over the previous 12 months to refurbish and reposition (read=tell people it's no longer a carpark) what had been an eyesore in the middle of the glass-and-steel financial district at Raffles Place. A job well-done, I thought. Now we hear CCT is planning to spend up to S$1.5 bln building a 240 metre, 850,000 square foot office tower on it.

I support the idea in principle. The Market Street Convenience Hub, or whatever fancy marketing term they have given it, looks a lot better than before the refurbishment, and the restaurant which faces Equity Plaza, Rogues, is streets ahead of the grimy hawker centres that used to be in its place. Plus, I believe carparks should be underground, not above ground. Leave the good views to people, not cars, particularly in the Central Business District. Further, the statement by CapitaCommercial Trust is in line with the well thought-out plan we've come to expect from the CapitaLand group. And I concede that S$14 mln probably isn't a lot of money in the context of the S$1.5 bln CCT is looking to spend on the redevelopment. CapitaCommercial also disclosed in its third quarter announcement that it earnt S$3.8 mln in profit from the car park, which reduces the wasted $14 mln to a wasted S$10.2 mln. But still.

But the analysts have already turned cautious, with Reuters last Friday quoting Citigroup ("hold", target price S$2.39) and JP Morgan ("underweight", target price S$2.21) as having cooled on CCT because they are cautious about office space beyond 2010. So, that alone begs the question about the merits of more office space being built now.

And here's the interesting part: the decision to refurbish the carpark was made under the stewardship of David Tan, who resigned as CEO effective September 15, 2007. His replacement, Lynette Leong took up the reigns September 21. It's hard to believe Mr Tan wasn't involved in some form of approach to the Urban Redevelopment Authority, upon whose blessing the announcement last Thursday was made. Further, neither Mr Tan nor Ms Leong are likely to act alone. Knowing CapitaLand as I do, it's always a team decision – a strength of the group.

But where's the explanation? Where's the, sorry-but-it's-now-or-never line which would at least acknowledge that S$14 mln of shareholders' funds is going down the toilet? The question is also not being asked by the mainstream media. The recent refurbishment gets no mention in Arthur Sim's Business Times report or Esther Fung and Ng Jing Yng's Today paper report on the announcement, let alone in CCT's announcement.

And finally, spare a thought for the poor motorists who are already subject to daylight robbery in terms of parking fees in the CBD. CCT says it has no plans to redevelop the Golden Shoe carpark. Thankfully, the Singapore Land Authority owns the hawker centre in the carpark there which would complicate redevelopment. But you can bet your bottom dollar that as soon as a deal is worked out there will be an announcement. In landscarce Singapore it's not great to have carparks above ground. But the drivers will pay for it in the end.


Mark Laudi, who takes the train every morning


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Labels: CapitaCommercial Trust, CapitaLand, carpark, Market Street