Published 2 June 2011
The Business Times
By Kalpana Rashiwala
Owner German fund manager SEB could be looking for $678m to $737m for the office tower
77 Robinson Road, formerly known as SIA Building, is expected to go on the market soon.
Its owner, German fund manager SEB, could be looking for a price of about $2,300-2,500 per square foot (psf) on net lettable area, which would work out to around $678 million to $737 million for the office tower, some property market watchers reckon.
A request for proposals was held for property consultants recently, and SEB is said to have picked Colliers International to market the building. Colliers is expected to conduct an expression of interest exercise to find a buyer.
The 35-storey office tower is on a site with a remaining lease of about 82 years. It has a total net lettable area of about 295,000 sq ft and 180 car parking lots.
Singapore Airlines sold the office block in June 2006 for $343.88 million or about $1,165 psf to a CLSA Capital Partners-linked fund, which in turn flipped it 10 months later for $526 million or $1,783 psf to SEB.
77 Robinson Road’s maximum development potential has been tapped; under Master Plan 2008, the site is zoned for commercial use with an 11.2+ plot ratio (ratio of maximum potential gross floor area to site area).
The property was completed in 1997. This was a $175 million redevelopment of the original 17-storey SIA Building which was completed in 1968, according to earlier media reports.
The lease on the site was topped up to 99 years in February 1994, which means that the lease will now expire in February 2093. Interestingly, the lease for 71 Robinson Road next door and, some sources now say, also that for Afro Asia Building nearby have been topped up to expire at about the same time.
Analysts say that the idea would be to have all sites on that stretch revert to the state simultaneously to allow for comprehensive planning and redevelopment of the area.
For this reason, most property consultants reckon that the authorities may not approve a further lease upgrade on the 77 Robinson Road site – which could create uncertainty among some investors and remove the option for redeveloping the site to residential use.
However, other analysts reckon that property funds and other investors confident about prospects for the Singapore office market would still be keen on the property based on its existing use and balance site lease.
Savills Singapore’s research head Alan Cheong noted that over $6 billion of large CBD office blocks changed hands last year; the momentum has continued this year with nearly $2 billion transacted so far.
‘Several major deals are in the pipeline. Prices of Grade A office space has risen about 50 per cent since the beginning of last year,’ he added.
Craig Ward, the company’s director of regional capital markets, says: ‘There are a number of investors – both domestic and international – looking actively into Singapore’s CBD office market. The investor profile is wide-ranging, from opportunistic to core and core-plus funds, Reits and local property companies. Savills is currently working closely with two global investors with an active requirement to purchase their first commercial property assets in Singapore’s CBD.’
Jones Lang LaSalle’s head of Asia-Pacific capital markets Stuart Crow says: ‘There’s less foreign equity chasing office deals here this time around compared with the last office investment boom which peaked in first-half 2008. Many of the private equity and European funds which were active in 2006/2007 are not in the market at the moment, and buyers are predominantly local.’
The highest price achieved for a CBD office building was $3,125 psf that Commerz Real paid for 71 Robinson Road in April 2008. So far in the current office upcycle, the highest price achieved is around $2,500-plus psf.
Among the office buildings in the market is TripleOne Somerset – formerly known as the Singapore Power Building – with a price tag of about $1.2 billion or about $2,132 psf. It is being marketed by an expression of interest exercise conducted by CB Richard Ellis and Jones Lang LaSalle. Bids close on June 14.
The property is understood to have garnered interest mostly from groups looking to reposition the asset as medical suites and increase the amount of retail space to take advantage of higher rentals than traditional office space.
Besides 77 Robinson Road, SEB owns a 55 per cent stake in 79 Anson Road; 12 floors of Springleaf Tower; a 60 per cent stake in the consortium that owns Chinatown Point mall; and Starhub Green, an industrial building at Ubi Avenue 1.
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