Angelo Gordon Buys SG Office Tower From Keppel REIT for S$548M

Less than one month after closing on $1.3 billion in fresh cash for its latest Asia real estate fund, US private equity firm has agreed to purchase an office complex in Singapore.

The New York based fund manager has signed an agreement to purchase the office component of the Bugis Junction Towers complex at the fringe of Singapore’s downtown core for S$547.5 million ($394.8 million) from Keppel REIT, according to an announcement to the Singapore bourse.

The purchase from the Singapore-listed trust is the latest in a series of trades for office assets in the southeast Asian financial hub as rising office rental rates have helped drive an upswing in capital markets activity.

Keppel REIT Notches $378M Capital Gain

Rising commercial asset prices in Singapore helped drive an attractive return for Keppel REIT, which had purchased the 248,853 square foot (23,119 square metre) property from its development affiliate, Keppel Land, for S$159.5 million in 2006.

“The divestment of Bugis Junction Towers is part of our ongoing portfolio optimisation strategy and realises capital gains of approximately $378.1 million,” Paul Tham, CEO of Keppel REIT’s manager said in a statement.

In an investor presentation regarding the divestment Keppel REIT’s manager indicated that the trust had achieved asset level returns of 19.4 percent per annum based on its capital gain on the property, which is located directly above the Bugis MRT station.

In response to inquiries from Mingtiandi, an Angelo Gordon representative confirmed the company’s involvement in the transaction, but declined to comment on or confirm any of the reported details reported elsewhere. At the transaction price, the investment manager is paying the equivalent of S$2,200 per square foot for the office property, where asking rents currently start at S$9.50 per square foot of net lettable area per month according to online listings by JLL.

Local news reports in Singapore indicated that Angelo Gordon was joined in the acquisition by local real investment firm TCRE Partners, a joint venture between Tower Capital Asia founder Danny Koh and investor Ben Yeo’s Y Developments.

Asset Trades at 3.0% Yield

The New York firm’s new prize includes 12 levels of office space from the fourth to the 15^th floors of the 15-storey complex, as well as two food and beverage spaces on the ground floor of the Bugis Junction mixed-use complex. The development, which also includes the Bugis Junction mall and an Intercontinental Hotel, is located on Victoria Street just over two kilometres (1.4 miles) north of the Raffles Place financial hub.

The fully leased office property, which received a platinum rating under Singapore’s Green Mark sustainability system, counts among its top tenants International Enterprise Singapore and the Intercontinental Hotels Group, as well as hosting a co-working centre operated by China’s Ucommune.

Originally completed in 1994, the asset has approximately 70 years remaining on its 99 year leasehold and carries a weighted average lease expiry period of 6.2 years. Valued at S$515 million in August of this year, Angelo Gordon and its partner are purchasing the Bugis Junction Towers at a net property income yield of 3.0 percent, according to Keppel REIT’s figures.

The capital markets team at Cushman & Wakefield in Singapore advised Keppel REIT on the disposal, with the sale expected to conclude before the end of this year.

Singapore Commercial Assets Still Hot

The sale of Bugis Junction Towers will contribute to Singapore’s big ticket investment acquisitions this year,” Cushman & Wakefield executive director Shaun Poh said in a statement. “The muted office supply situation over the next three years and projected rental growth during that period have emboldened investors to actively seek out office assets now in the run up to the peak of the CBD supply glut, which is expected to be around 2021-2022.”

Angelo Gordon has agreed to its Singapore acquisition less than two months after Hong Kong-based competitor Arch Capital signed a deal to acquire the Lion City’s Anson House office tower for S$210 million.

That deal at the southern edge of Singapore’s financial district was revealed by Mingtiandi during the same week in August that Germany’s Commerzbank announced that it was selling 71 Robinson Road, an office tower in the city’s Tanjong Pagar area, to local investment firm Sun Venture for S$655 million.

A report released by JLL in July showed that investors poured $4.6 billion into Singapore office assets during the first half of 2019 – a 53 percent increase over the $3 billion recorded during the second half of last year.

That increase in transactions was driven in part by rising rental rates, with average office rental prices rising 1.5 percent in the second quarter compared to the preceding three months, according to JLL. The company noted that an ongoing supply shortage made it likely that rents, which averaged S$10.79 per square foot of net lettable area per month at the end of June, would continue to rise.