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Shophouses in demand among investors again

Investment in Singapore shophouses has stabilised and shows signs of picking up after taking a hit following the introduction of a loan curb in 2013.

Posted on 16-Mar-2017

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Shophouses in demand among investors again

REAL estate developer and fund manager CapitaLand is said to be in exclusive negotiations to acquire Asia Square Tower 2 from BlackRock, PERE reported on Thursday.

The publication, which reports on news in the private real estate markets, cited sources familiar with the transaction as saying that the price that CapitaLand has agreed to pay for the 46-storey prime commercial building in Singapore's Marina Bay district is more than S$2,700 per square foot (psf).

When contacted, John Saunders, Head of Asia Pacific for BlackRock Real Estate, said: "Asia Square is a trophy grade-A office building in Singapore, often considered as one of Asia's best such developments.

"The landmark sale of Tower 1 in June 2016 was testament to the premier status of the asset, and we are pleased with significant investor interest received for Tower 2.

"However, we are not in a position to discuss our plans. Our goal remains to focus on achieving the best outcome for our investors."

He added that a plot of land which sits next to Asia Square in Marina Bay had set a record price for Singapore's government land sales in November 2016, demonstrating investor confidence in the office market.

The plot of land was won by Malaysian developer IOI Properties which had surprised with a S$2.57 billion bid, translating to S$1,689 psf per plot ratio and setting a new benchmark.

A CapitaLand spokesperson said: "CapitaLand maintains a disciplined approach to acquisitions and assesses opportunities based on the fit to our overall strategy and whether the return profiles meet our requirements. There is no certainty or assurance of any such plans materialising."

Tower 2 comprises offices and the Westin hotel. As at the end of October 2016, the building was over 90 per cent occupied.

The deal, if it goes through, will mark the end of the sales process of BlackRock's two-tower development which took up a majority share of the gross asset value of BlackRock Real Estate Fund III when it closed on US$3.9 billion of equity commitments in 2008.

Asia Square Tower 1 was sold to the Middle Eastern sovereign wealth fund Qatar Investment Authority (QIA) for about S$3.4 billion in June last year. It was Singapore's biggest office transaction and one of the largest single-asset property deals in the Asia-Pacific at the time.

As part of the deal, QIA was also granted the right of first refusal to acquire Tower 2 when it was available in the market.

In November last year, Bloomberg reported that BlackRock had started to reach out to potential buyers to gauge their interest in Asia Square Tower 2.

CapitaLand had also been among the bidders hoping to buy Asia Square Tower 1 in 2015, alongside others such as ARA Asset Management and Norges Bank Investment Management. However, CapitaLand eventually pulled out of the bid in November 2015.

In February 2016, The Business Times reported that heads at CapitaLand, during the company's results briefing, implied that it had bowed out of negotiations to buy Asia Square Tower 1 because the property did not fit its group strategy, and its yields did not meet requirements.

On Thursday, the developer's stock rose eight cents or 2.2 per cent to S$3.73.

Separately on Thursday, Bloomberg reported that US private equity firm Blackstone plans to sell one of the office and retail assets it bought last year from Malaysian palm-oil producer Sime Darby.

Citing people familiar with the matter, Bloomberg said Blackstone expects to get about S$300 million for the Sime Darby Centre in the Bukit Timah area, which it bought for just under S$200 million.

CBRE Group is said to be advising Blackstone on the sale. Bloomberg's sources did not disclose any prospective buyers.

Blackstone in May acquired a majority stake in three Singapore property assets, including the Sime Darby Centre, in a deal that valued them at about S$300 million.

The Sime Darby Centre is spread across 250,000 square feet, of which about 80 per cent is office space and the rest is retail.

Blackstone owns a 70 per cent stake in Sime Darby Centre and Sime owns the rest. The conglomerate, Malaysia's biggest listed palm-oil producer, has sold some property assets in Australia and Singapore to help pare debt.

Sime Darby's counter hit a one-year high on Thursday, rising 17 sen or 1.9 per cent to end at 9.30 ringgit.

The Business Times

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