Chevron House back on the market

Business Times: Thu, Sep 22
(SINGAPORE) A year after it was sold, Chevron House is back on the market.

Deka Immobilien of Germany – which bought the building next to Raffles Place MRT Station for $547 million or $2,083 per square foot (psf) last September – has appointed CB Richard Ellis and Savills Singapore as marketing agents.

The pricing expectation is at least $2,500 psf on net lettable area (NLA) or $656.6 million, BT understands. Chevron House is on a site with a remaining lease of about 77 years and has asset enhancement potential.

BT also understands that Jones Lang LaSalle has been appointed to market Commerce Point, a 19-storey, 999-year leasehold office block on Phillip Street, further away from Raffles Place MRT Station. The property is being sold by an expression of interest which closes on Sept 28. The asking price is said to be around $2,500-2,600 psf. Seller Aviva bought the property in June 2008 from City Developments for $181 million or $2,200 psf.

The highest psf price for an entire office block transaction this cycle (since Lehman Brothers’ collapse three years ago) is $2,524 psf (based on NLA of 89,950 sq ft) for One Finlayson Green in March.

In the strata office floor segment, the recent benchmark is $2,800 psf for the 20th floor of the 999-year leasehold Samsung Hub on Church Street. Colliers International brokered the sale. The seller is property investor Kishore Buxani and the buyer is understood to be a foreign outfit.

Chevron House is currently nearly 80 per cent occupied, and once the remaining vacant space is leased out, the new owner may get a net yield of close to 4 per cent based on projected net operating income for the next 12 months, assuming a $2,500 psf pricing for the asset.

Monthly rents in the building are averaging about $12-13 psf for retail space and $7.50 psf for offices. Its 262,650 sq ft net lettable area comprises about 230,000 sq ft of offices and some 32,000 sq ft of retail space. The latter is spread across five levels (basement one to level four). There are 96 car park lots on B2 and B3.

There is scope to increase the retail space by about 19,000 sq ft (net lettable area) by tapping unutilised plot ratio – for which no differential premium is payable. Another source of potential value adding will be to upgrade the office common areas.

Industry observers point out that several office blocks in the central business district (CBD), mostly in the Robinson Road/Cecil Street stretch, are already on the market with asking prices of about $2,300 psf – which have not been met yet.

Chevron House’s location is an advantage, with basement connection to the Raffles Place MRT Station next door.

It also generates substantial income from retail space, signage advertising, carts and an outdoor promotion/display area on the ground level fronting Raffles Place Park/MRT Station. This will give the potential investor a higher income yield compared with investing in a pure office building.

There is also substantial upside income potential from the additional 19,000 sq ft retail space that can be built.

The higher valuation for the building’s retail space would imply the valuation for the office component will be below $2,500 psf.

While Deka could also tap the asset enhancement potential of Chevron House, it may be quite content to take a profit on the asset – its sole property investment in Singapore – and leave the asset enhancement to the next owner, BT understands.

Market watchers note that property buying interest from most American and European funds has quietened with the weak economic situation back home, but funds that have raised monies globally but are substantially operated out of Asia are more active. Singapore-based property funds and property companies may also be keen. Malaysia’s Employees Provident Fund (EPF) is also known to be on the prowl.

The expression of interest for Chevron House is expected to be launched next month.
Source: Business Times © Singapore Press Holdings Ltd.

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