Thursday, February 17, 2011

Havelock Rd office block up for sale

MORE office blocks continue to be put on the market for sale. 2 Havelock Road (formerly Apollo Centre) is being marketed by Jones Lang LaSalle through a private treaty process. JLL's pricing expectation is about $1,700 per square foot on net lettable area (NLA) or around $302 million.

And the expressions of interest exercise for Capital Square at Church Street in the Raffles Place micro-market, being handled by Cushman & Wakefield, closes tomorrow.

The marketing appointments for both properties are exclusive.

2 Havelock Road is being sold by US property fund manager AEW. It paid $205 million for the former Apollo Centre in 2007 and completed an extensive refurbishment of the property in 2009, increasing its net lettable area by about 20 per cent to 177,833 sq ft. The current NLA comprises 141,547 sq ft of office space and 36,286 sq ft of shop space.

The eight-storey building is on a 54,560 sq ft site with a remaining lease of about 71 years. It has 95 car park lots in two basement levels. The building is 92 per cent committed to tenants, the biggest of which is Estee Lauder, occupying close to 50,000 sq ft.

Other major office tenants include Mitsui-Orient Lines Shipping and Willis Insurance. The most recent office lease in the building was done recently at $7 per square foot a month.

AEW also owns Robinson Point, which it picked up from CapitaCommercial Trust early last year for $203.25 million or about $1,527 psf.

Analysts say Capital Square, a 12-year-old Grade A office development, could fetch about $2,300-2,400 per square foot of NLA, or about $889-928 million.

However, some sources suggest a higher price could be eyed, closer to the $2,500 psf level, citing stronger appetite these days among institutional investors especially from Europe for the office sector in the Asia-Pacific, including Singapore.

Last year, K-Reit Asia and Suntec Reit each purchased a one-third stake in Marina Bay Financial Centre's first phase. Excluding income support, both deals worked out to $2,400 psf. Last month, NTUC Income acquired a 49 per cent equity stake in the company that holds 16 Collyer Quay, formerly known as Hitachi Tower, in a deal which valued the 999-year leasehold office tower at $2,250 psf.

Capital Square is owned by Munich Re and Ergo and managed by MEAG Pacific Star Asset Management, a joint venture between MEAG (the asset manager of Munich Re and Ergo from Germany) and Pacific Star.

The building was developed by Keppel Land and Rodamco. The duo sold the property to Ergo around late 2002 in a deal that valued the asset at $490 million. That transaction was structured as an asset securitisation which raised $505 million through the issue of seven-year bonds.

Market watchers recall that ahead of the bonds' maturity, Ergo had mulled a sale of the asset in 2009, but eventually opted for a $549 million refinancing deal which involved the issuance of notes arranged by Australia and New Zealand Banking Group.

Capital Square, which was completed in 1998, is on a site with a remaining lease of about 84 years. It has a total net lettable area of 386,525 sq ft comprising a 16-storey office tower (about 339,000 sq ft) with floor plates averaging about 30,000 sq ft) and two rows of conservation shophouses (around 38,000 sq ft of boutique offices and 9,600 sq ft shop space). The development has 362 carpark lots.

Tenants include Morgan Stanley, Bloomberg, Aberdeen Asset Management and Citibank.

In the Tanjong Pagar area, Singapore Technologies Building has been sold for about $150 million or $1,500 psf to Resorts World at Sentosa Pte Ltd.

Other office buildings in the market include 182 Clemenceau Avenue and Finexis Building at 108 Robinson Road (formerly known as GMG Building) - being marketed by JLL and DTZ respectively.

The office sector accounted for about a quarter or $8.7 billion of a total of $25.4 billion of property investment sales transactions in Singapore last year, according to CB Richard Ellis' figures.

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