Income@Raffles Office Bldg Selling For S$900mil

SINGAPORE – It has been learned that Income@Raffles, a 999-year leasehold predominantly office tower along at 16 Collyer Quay, is being discreetly marketed for sale via a closed expression of interest exercise, reported The Business Times on Tuesday morning (31 May, SGT).

The indicative price is said to be S$900 million, which works out to S$3,300 psf based on the 37-storey commercial property’s net leasable area (NLA) of roughly 276,450 sq ft. The guide price translates to a net yield of nearly to 2.5 percent based on the asset’s present rental income, and the office building has a committed occupancy of slightly more than 90 percent

The commercial property’s NLA consists of around 253,650 sq ft of office space and 22,800 sq ft of retail premises. It also comes with 148 parking lots in its basement levels. Additionally, the refurbishment of the asset was finished in 2021.

Previously known as Hitachi Tower, the development has an existing gross floor area (GFA) of about 415,450 sq ft, which is 14 times the site area. As such, it has an untapped GFA of over 29,000 sq ft as it has a plot ratio of 15.0 under the latest URA Master Plan.

The office tower is owned as an investment property by Savu Investments, which in turn is now a fully owned unit of NTUC Income Insurance Co-operative.

NTUC purchased Income@Raffles property from Goldman Sachs in two phases. In early 2011, it acquired an initial 49 percent stake in Savu Investments in a transaction that valued the asset at around S$626 million (S$2,250 psf). Then two years later, NTUC bought the remaining 51 percent stake of Savu Investments that valued 16 Collyer Quay at about S$660 million (nearly S$2,400 psf).

Experts shared that in terms of psf of existing NLA, the highest selling price of an entire office tower in Singapore is S$3,721 psf for the S$500 million sale of the freehold Robinson Point by Tuan Sing to Viva Land. The deal was entered into in 2020 and concluded in 2021. However, market watchers think that the record price probably took into account the asset’s redevelopment potential.

Other Singapore office properties currently available in the market include Lazada One, Anson House, Robinson 77, 78 Shenton Way, and Bugis Junction Towers.

While office investment sales here started picking up in 2021 and the momentum continued in Q1 2022, experts said that office deals could slow down due to rising interest rates. This is because most private equity real estate investors would want a fixed-rate, non-recourse loan to help fund their office purchases.

But at present, some banks in Singapore are charging interest rates of 3.3 percent to 3.5 percent per year for such loans, surpassing net property yields based on the asking prices for most office properties in the market.

Nonetheless, Savills Singapore’s Research Head said that “while institutional funds may adopt a more cautious stance towards investing in Singapore’s office market, ultra-high net worth individuals and family offices may still be keen on the sector. In an age of uncertainty, yield is not their primary concern. Rather, they are in search of a safe harbour, for which Singapore has a clear advantage.”

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