Landlords Still Trying To Sell Big-ticket Office Assets
SINGAPORE – Institutional investors, the usual purchaser of big office properties, appear to be not in the mood to buy, as borrowing costs now surpass the yields of such assets. In fact, not a single office building in Singapore has changed hands for at least S$500 million since June 2022, according to a commentary published on The Business Times on Wednesday morning (24 May, SGT).
Nonetheless, a few landlords have quietly put up for sale their big-ticket office properties. For instance, expression-of-interest exercises closed recently for Mapletree Anson and for a 50 percent stake in Asia Square Tower 1.
Mapletree Anson’s owner, Mapletree Pan Asia Commercial Trust (MPACT), is said to be targeting a selling price of S$880 million, which is 17 percent premium over the S$752 million valuation for the office building less than two months ago. As for Asia Square T1’s half-stake, the owner Qatar Investment Authority is said to be asking for almost S$2 billion.
Additionally, The Business Times has learnt that Keppel Corporation has appointed CBRE and Jones Lang LaSalle (JLL) to market a half-stake stake for the 33-storey Keppel South Central. The upcoming office development on the freehold site of the former Keppel Towers at Hoe Chiang Road is expected to be ready by Q4 2024.
Given that the trust is pursuing a portfolio reconstitution strategy, divesting Mapletree Anson would allow MPACT to divert the sale proceeds into a higher-yielding asset, possibly outside of Singapore.
As for Keppel Corporation, industry players revealed it has been the group’s intention to divest a 50 percent stake in Keppel South Central for some time now, in line with the group’s asset-light strategy.
As for Qatar’s cash-flush sovereign wealth fund, it could be planning to recycle capital by disposing a 50 percent interest in Asia Square Tower 1. The 43-storey building, which primarily contains offices, has an occupancy rate of around 95 percent occupied. Major tenants include Amazon, Citibank, and insurer Marsh.
For Keppel South Central, market watchers estimate Keppel Corporation could be eyeing a selling price of about S$3,500 psf. This is after the nearby Income At Raffles was acquired for S$3,617 psf in June 2022.
The buyer, a locally incorporated entity called Bright Ruby Resources, controlled by Chinese businessman Du Shuanghua, forked out a total of S$1 billion in an all-cash deal. The net yield was around 2.1 percent, and the 37-storey office property has since been rebranded as the Collyer Quay Centre.
But because of the recent interest rate hike institutional investors are staying on the side-lines, unless the asking prices of office properties are reduced.
“Last year, institutional investors were prepared to buy office buildings at 3 percent to 3.25 percent net yield. Today, to attract these buyers may require a 50-basis-point expansion in the property yield to 3.5 percent to 3.75 percent,” noted a veteran analyst. However, the analyst is unsure if sellers would agree to this (i.e. lower their asking prices).