AEW Said to Make S$1B Bid for Chevron House at Raffles Place

Oxley Holdings announced late Thursday that it has received an unsolicited expression of interest in the amount of S$1.025 billion ($758 million) for the Chevron House building at Raffles Place, exactly one year after the Singapore-listed developer completed its purchase of the commercial tower.

The offer for the 32-storey asset in Singapore’s primary finance hub is understood to come from US real estate fund manager AEW, according to two market sources who spoke with Mingtiandi on the basis of anonymity. Oxley revealed the expression of interest in a notice to the Singapore stock exchange.

The announcement marks the beginning of exclusive negotiations by Oxley with its potential buyer and comes as demand for Singapore office assets continues to grow among institutional investors.

Oxley Could Realise 35% Gain

The proposed purchase price represents a more than 35 percent increase in capital value over the S$660 million that Oxley had paid to acquire the 1993-vintage tower from Deka Singapore – a fund managed by Germany’s Deka Immobilien – in a deal which closed in March 2018.

Since that time, Oxley has prepared plans to renovate the aging commercial property while boosting its 261,280 square feet (24,274 square metres) of net lettable area by around 43 percent to 374,165 square feet, according to a presentation by the developer, although these plans have yet to be approved by authorities.

The 99-year leasehold property still has 69 years remaining on the land-use rights for its 2,778 square metre site, and currently has 27 storeys of office accommodation above a five storey retail podium. Oxley indicated in a presentation last month that Chevron House’s indicative valuation was S$787 million.

The Expression of Interest provides AEW, if it is the bidder, a lock-up period of 45 days in which to hold exclusive negotiations on the potential transaction. AEW’s Singapore team, which is led by 10-year company veteran Jeffrey Ong, is said to have entered into the discussions with Oxley directly without involving a broker.

Mid-Sized Developer Becomes a Big-Time Seller

A sale could provide Oxley with a welcome cash infusion after the mid-sized developer saw its debt levels soar last year following an acquisition spree. The company chaired by Chiang Chiat Kwong, who also serves as CEO, has been involved in a number of property disposal discussions over the past few months.

In mid-January Oxley announced that it had received a letter of intent from an unnamed buyer, believed to be entities controlled by Indonesian billionaire Dato Sri Tahir, to purchase a pair of its hotels on Singapore’s Stevens Road for $950 million.

The company’s negotiation for the sale of a Novotel and a Mercure hotel in one of Sinagapore’s most upscale areas came less than two months after Oxley agreed to sell a 300-year leasehold of a Dublin mixed-use property that it had built for S$166.32 million.

During the three months ending September last year, Oxley’s profits dropped 83 percent to S$8.06 million from S$48.74 million for the same quarter of the previous year, with revenues declining 45 percent.

AEW Team Working Overtime

Should the news of AEW’s involvement be substantiated, the potential transaction would be just the latest sign of activity by the Boston-based firm which closed on a $1.12 billion value-add fund in June of last year.

Since that time, AEW has made a pair of major mainland acquisitions, including joining with CapitaLand to buy 70 percent of a Shanghai office building from HNA for RMB 2.75 billion in January of this year. In late 2018 the firm acquired a Beijing office tower from Hong Kong-listed Hopson Development for RMB 4.5 billion.

Contacted by Mingtiandi, an AEW representative declined to comment on the company’s reported involvement in this latest transaction.

Fund managers ARA Asset Management and Gaw Capital Partners have both made major investments in Singapore office properties in recent months, as rents for prime space continue to rise across the city. In a report released in November last year property consultancy Savills noted that grade A office rents had grown 9.6 percent in Singapore over five quarters dating from the third quarter of 2017, with rates for prime offices having risen 4.3 percent in the three months ending September.

AEW has also been an active seller in the Southeast Asian city-state, disposing of a shopping mall in Singapore’s northern heartland last week to SC Capital Partners for S$230 million.