Solid interest in office investment sales | singapore investment

Business Times: Thu, Jul 07
(SINGAPORE) Office investment sales continue apace, with high prices touched in the Tanjong Pagar and Cecil Street/Robinson Road office micromarkets, BT understands. RCL Centre, a 12-storey freehold office block with triple frontages along Keppel, …
(SINGAPORE) Office investment sales continue apace, with high prices touched in the Tanjong Pagar and Cecil Street/Robinson Road office micromarkets, BT understands.

RCL Centre, a 12-storey freehold office block with triple frontages along Keppel, Tanjong Pagar and Lim Teck Kim roads, is understood to have been sold for about $175 million, which works out to about $1,890 per square foot (psf) based on the property’s existing net lettable area (NLA) of around 92,500 sq ft.

RCL Centre, which was completed in 1994, is being sold by Thai-listed Regional Container Lines (RCL), chaired by PL Kua.

The buyer is said to be an Indonesian party.

Analysts note the unit price of about $1,890 psf is a significant 28 per cent premium to the $1,476 psf that Genting Singapore subsidiary Resorts World Properties paid for the next-door Singapore Technologies Building in February this year. The 13-storey freehold property is now known as Genting Centre.

The price being paid for RCL Centre is estimated to reflect a net yield of slightly above 2 per cent based on average rents of about $5 psf a month for a building of that age in that location, according to an analyst’s estimate. The occupancy rate in the building is said to be currently in the low-90 per cent range. RCL itself occupies around 30 per cent of the office block.

A property consultant suggests one reason the buyer is prepared to pay a premium for the property is that it could be eyeing a potential redevelopment of the ageing office block over the longer term, possibly into a mixed-use scheme comprising apartments and offices if the authorities permit a change of use.

Under Master Plan 2008, the site is zoned for commercial use with 5.6+ plot ratio (ratio of maximum gross floor area to land area).

Two office floors at Samsung Hub are understood to have been transacted at $2,600 psf recently – about 22 per cent higher than the $2,125 psf achieved on four floor floors in the building in August last year.

The market is abuzz as to whether a deal may be imminent for 135 Cecil Street, formerly known as LKN Building. Its owner, a unit of Alpha Investment Partners, is said to have received an offer of about $2,200 psf for the freehold office block which has been refurbished extensively.

Cushman & Wakefield Singapore vice-chairman Donald Han said that if 135 Cecil Street is indeed sold at $2,200 psf, it would set a new benchmark for the Cecil Street area.

‘For bite-sized investments of below 100,000 sq ft NLA or under $200 million, there’s a ready pool of buyers, particularly among high net worth individuals from Singapore and the region looking to buy their own flagship office buildings,’ he added.

Savills Singapore executive director and head of investment sales Steven Ming said: ‘The expectation of further office rental growth and sheer liquidity out there among investors are fuelling interest in Singapore office investment deals.

‘Smaller-quantum commercial investment transactions could also have attracted high net worth monies from Singapore and the region seeking to find some income-yielding investments, and non-residential assets are now being favoured.’

Nearly $4 billion of office investment sales are estimated to have been transacted in the first half of 2011.

135 Cecil Street is a 13-storey freehold building with net lettable area of 85,431 sq ft. Market watchers note that the price range being discussed for the property would be about 20 per cent higher than the $1,822 psf fetched last December for Robinson 112 (the former HB Robinson), which is diagonally behind 135 Cecil Street.

Interestingly, the nearby freehold Finexis Building at 108 Robinson Road too is said to have received an offer, of nearly $2,000 psf.

Some sources also say that Robinson Point has drawn interest from potential buyers at around $2,250-2,300 psf.

This price level reflects a premium of about 50 per cent over the $1,527 psf that the freehold office block’s current owner, US property fund manager AEW, paid for the asset in January 2010.

Source: Business Times © Singapore Press Holdings Ltd

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