CapitaLand Commercial REIT Sells WeWork-Leased Singapore Tower for $510M

CapitaLand Integrated Commercial Trust sold its 21 Collyer Quay office tower in Singapore’s Raffles Place to an undisclosed buyer on Monday for S$688 million ($510.8 million), the SGX-listed REIT’s manager announced Tuesday.

The sale price is equal to an independent valuation conducted by Savills last month, said CICT’s manager, which is owned by Temasek-controlled CapitaLand Investment. The buyer was described as an unrelated third party in a filing with the Singapore Exchange. Market sources reported that the buyer is believed to be a family office which paid cash for the 21-storey property.

The tower’s 220,000 square feet (20,439 square metres) of Grade A office space is leased to co-working giant WeWork, which in 2019 took over 21 Collyer Quay from Asia-focused British lender HSBC.

The net proceeds from the divestment amount to S$681.7 million, which will “provide CICT with greater financial flexibility to repay debt, to finance any capital expenditure, asset enhancement works and investments and/or to finance general corporate and working capital requirements,” the manager said.

Lowball Offer Prevails

CICT acquired 21 Collyer Quay for S$147 million in 2005. The $18.4 billion trust had been seeking as much as S$800 million for the 1982-vintage tower, according to a July Bloomberg account, but the asset ultimately sold for 14 percent less than the reported asking price.

The S$688 million sale translates to S$3,127 ($2,320) per square foot of office space. The exit yield is below 3.5 percent, the manager said.

WeWork operates 21 Collyer Quay as the largest location in the Manhattan-based group’s Pacific region, defined as Australia, South Korea and Southeast Asia. Hourly rates start at S$12 per seat, in line with those at WeWork’s 12 other locations in the city-state.

The land beneath the tower is on a “virtual freehold” of 999 years, and WeWork’s seven-year lease of the building began in the second quarter of 2021.

Significant Strides

The divestment comes as CICT posted first-half distributable income of S$366.5 million ($277 million), up 3.7 percent year-on-year, as strong leasing countered missing revenue from an under-renovation German property.

The trust achieved positive rent reversions by signing and renewing leases for over 1 million square feet of space, said CEO Tony Tan.

“We have also made significant strides in managing the remaining leases slated to expire in 2024, with the majority of them pending signing of agreements,” Tan said.

Savills reported that office vacancy in Singapore’s CBD edged up 0.2 points to 6.2 percent in the September-ended quarter. The average monthly rent in the CBD stood at S$9.70 per square foot, up 0.3 percent on a quarterly basis and rising 0.5 percent from year-earlier levels, the consultancy said.