CapitaCommercial Trust and CapitaLand saya they intend to jointly redevelop Market Street Car Park into Grade A office tower for $1.4 billion.

As owner of the property, CapitaCommercial Trust says it has obtained provisional permission from Urban Redevelopment Authority and received an indication from Singapore Land Authority of the differential premium which would be payable for the property’s change of land use based on the unexpired land lease of 62 years. This works out to be $1.4 billion.

Based on this figure, the development is considered financially viable with the stabilised yield from the completed development expected to exceed 6% per annum.

Under the MAS property funds guidelines for Singapore REITs, the Trust may only develop projects the total cost of which must not exceed 10% of its total asset size.

As the estimated total project cost will exceed such limit, the Manager is in discussion with CapitaLand for the proposed joint redevelopment of the property by way of a special purpose vehicle in which CCT will own a 40% interest and CapitaLand the balance.

The design of the new office tower is being led by the internationally-acclaimed, award-winning Japanese architect, Mr Toyo Ito. The proposed redevelopment is expected to be completed before the end of 2014.