Partial Stake In OUE Bayfront Office Tower Being Sold For S$3,200 psf
SINGAPORE – A company backed by Allianz Real Estate is said to be carrying out an exclusive due diligence, with an aim to purchase a slice of OUE Bayfront, reported The Business Times on Thursday morning (26 November, SGT).
OUE Commercial REIT’s manager confirmed on Thursday afternoon that it’s presently in exclusivity with an entity connected to Allianz Real Estate with respect to the sale of a partial stake in the commercial property. However, negotiations are still ongoing and both parties have yet to enter into any binding contract for the sale.
The original Business Times news said that the acquisition is expected to give a S$1.28 billion valuation to the 18-storey Grade A office tower, which is considered OUE Commercial REIT’s most valuable asset. The price works out to about S$3,200 psf based on the asset’s net leasable area (NLA) of 399,824 sq ft (37,144.9 sq m).
Assuming the buyer secures a 50 percent interest in the commercial property, the selling price would work out to about S$640 million.
At the end of 2019, the development had a book value of S$1.18 billion (S$2,954 psf). But several months ago, OUE Commercial REIT was asking at least S$3,300 psf for the asset.
It’s possible that Allianz may be acquiring the office building as a representative for South Korea’s National Pension Service (NPS), market watchers said. In 2019, NPS acquired a 50 percent stake in Frasers Tower for S$982.5 million. The Grade A office building with a height of 38 storeys is located in the city-state’s financial district.
There’s also a chance that OUE Bayfront will be picked up by the US$2.3 billion property fund established by NPS & Allianz in June 2020.
By taking up debt, the fund known as Allianz Real Estate Asia-Pacific Core I has the capability to invest in US$4.6 billion worth of properties across Asia Pacific (APAC). Notably, NPS and Allianz Group each contributed 50 percent to the equity of the closed-end fund, whose general partner and investment manager is Allianz Real Estate.
The Singapore-based fund eyes equity investments in office, multifamily residential, logistics, and student housing across Singapore, Hong Kong, Australia, China, and Japan.
Situated between Marina Bay new downtown and Raffles Place OUE Bayfront consists mainly of prime office space. Major tenants include Bank of America Merrill Lynch, while 5 percent of the property’s area houses retail space.
Built in 2011, the project’s office component has floor plates spanning about 26,000 sq ft to 30,000 sq ft. The building stands on a site with a remaining leasehold tenure of 86 years. As of 30 June 2020, its occupancy rate stood at 100 percent.
Real estate agents revealed that OUE Bayfront has the most expensive weighted average office rents within Singapore’s central business district (CBD).
Galven Tan, Savills Singapore’s Deputy Managing Director for capital markets, said that despite the uncertainty over corporate office space demand over the near-term, the city-state’s office sector remains resilient thanks to limited inventory.
“There is currently a shortage of good quality stock for sale, which is affecting the pipeline volume of transactions in 2021. Buying interest remains strong from real estate private equity funds and family offices,” he added.
But amidst the COVID-19 pandemic, office transactions here only totalled nearly S$3 billion so far this year. In comparison, office deals reached slightly more than S$6 billion for the whole of 2019.
