CapitaLand Commercial Trust (CCT) has chalked up Singapore’s biggest office transaction of the year by agreeing to sell Twenty Anson, a 20-storey office building in the Tanjong Pagar neighbourhood, for a total of S$516 million ($379 million).
The Singapore-listed trust, which is the city-state’s largest commercial REIT, announced that its trustee had struck an agreement for the sale of the building to an unrelated third party. The buyer is believed to be a foreign private equity fund, according to an account in The Straits Times.
CCT is the office-focused REIT affiliate of Singapore’s biggest developer CapitaLand. The transaction, expected to close in the third quarter of the year, will reduce CCT’s Singapore-centric portfolio to ten properties with a total net lettable area of 4.7 million square feet following the sale.
The agreed selling price equates to S$2,503 per square foot of net lettable area for the 206,000 square foot property, and is 19.2 percent above the asset’s valuation of S$433 million at year-end 2017, and 20 percent more than the S$430 million that CCT paid for the building in 2012.
Sale Leverages Bullish Office Outlook
Completed in 2009, the office tower is located at 20 Anson Road in the Tanjong Pagar area just south of the downtown core, with sheltered access to Tanjong Pagar MRT station. The tower has a committed occupancy rate of 94.3 percent (as of March), and counts Toyota Motor Asia Pacific, BlackRock Advisors Singapore, and BCD Travel Asia Pacific as its top three tenants.
The selling price comes at a net property yield of 2.7 percent, based on Twenty Anson’s net property income of S$13.8 million for the 12 months through March 31, at which time the asset accounted for around 3 percent of CCT’s net property income.
CCT’s manager said the divestment would unlock value and enhance the financial flexibility of the trust, reducing pro-forma aggregate leverage from 37.9 percent (as of March) to 34.5 percent, assuming the sale proceeds would be used to repay debt.
Cushman & Wakefield director Shaun Poh, whose team brokered the sale, said in a statement posted on LinkedIn that, “The sale, the largest office transaction to date this year, caps a robust quarter for the office investment market on the back of a rental recovery in the prime office market,”
He added that the deal marked investor confidence in a rebounding Singapore office market in the face of a diminishing pipeline of new projects.
High leasing volume combined with a limited supply pipeline drove a 3.2 percent growth in grade A core office rents quarter-on-quarter to S$9.70 per square foot per month in the three months of 2018 — an 8.4 percent increase year-on-year, according to property brokerage CBRE.
CCT Renews Portfolio, Presses on with CapitaSpring
The latest sale comes as CCT, which had investment properties totalling S$10.9 billion at year-end 2017, seeks to reconstitute its portfolio and forges ahead on CapitaSpring, a landmark $1.3 billion skyscraper in the downtown business hub of Raffles Place.
“We will continue to explore opportunities to enhance our portfolio as demonstrated by our ongoing development of CapitaSpring in Singapore and acquisition of Gallileo in Frankfurt, Germany,” commented, Kevin Chee, CEO of the manager in a statement.
CCT and its joint venture partners CapitaLand and Japan’s Mitsubishi Estate Co broke ground on CapitaSpring in February, and investment banking giant JP Morgan signed up as the mixed-use development’s first anchor tenant in April.
The trust landed its first acquisition outside Asia in May by snapping up Gallileo, a 28-storey, grade A commercial building in central Frankfurt for about $421 million.