A unit of Germany’s Commerzbank is selling an office tower in Singapore’s central business district at a 12 percent mark-down, some eleven years after purchasing the 13-storey office tower for S$744 million (now $542.79 million).
Commerz Real has sold 71 Robinson Road in Singapore’s Tanjong Pagar area to local real estate investment house Sun Venture for S$655 million, according to an announcement this week by the property investment arm of the Frankfurt-based institution.
“We have utilised the market and leasing situation to attain an extremely attractive market price for our investors,” said Commerz Real’s global head of transaction management, Henning Koch, adding that his firm was still interested in making new acquisitions in Asia.
Koch and Commerz Real sold the 237,644 square foot (22,078 square metre) property to Sun Venture on behalf of the company’s open-ended real estate fund hausInvest for a price equivalent to just over S$2,756 per square foot, as rising office rents have helped drive up commercial real estate values in the city-state.
WeWork, Visa and Ogilvy Share Space on Robinson Road
With 74 years remaining on its leasehold of the site at Robinson Road and McCallum Street, just south of Raffles Place, 71 Robinson Road is fully occupied and carries an average passing rent of around S$10 per square foot per month.
Co-working operator WeWork has occupied three of the building’s 13 storeys since 2017, while CommerzBank, Visa, and PR and advertising agency Ogilvy are also tenants.
The Ingenhoven-designed tower has average floor plates of 20,000 square feet and was opened in 2009 after being developed by since-departed Lehman Brothers and Japan’s Kajima Overseas Asia at a cost of around S$613 million.
Commerzbank’s acquisition of the then-unfinished asset from Lehman and Kajima eleven years ago had set a then-record high price in the city of S$3,125 per square foot. Commerz Real was advised on the sale by CBRE and JLL.
Sun Venture Expands Investment Portfolio
Sun Venture, a decade-old real estate developer and investor fronted by managing director Alvin Teo is adding 71 Robinson Road to an investment portfolio which already includes the Westgate Tower office complex in Jurong East, the Samsung Hub office building on Church Street and the Paya Lebar Square shopping centre.
“This deal is another high profile sale that demonstrates the confidence investors have in Singapore and in the office sector in particular,” said Chris Fossick, chief executive officer of JLL Singapore and Southeast Asia, who added that office transactions in the city have reached close to S$4.6 billion so far this year and were likely to finish 2019 at a 10-year high.
According to the agency chief, there is currently a deep pool of capital chasing opportunities for commercial space in Singapore, which was demonstrated by strong bidding for 71 Robinson Road, primarily from an institutional investor base with a core or core plus investment mandates.
Just five months ago Hong Kong’s Gaw Capital Partners had invested in property a few doors away from Sun Venture’s latest acquisition, when it closed on a deal to buy 77 Robinson Road for S$710 million, part of a trend that drove Singapore office transactions up by 176 percent last quarter.
In 2016 Sun Venture sold the Straits Trading Building on Battery Road, next to Raffles Place to Indonesian tycoon Tahir for a reported S$560 million, scoring a mark-up of over 24 percent after buying the office property for S$450 million in 2014.
Singapore Rising Rents Driving Investor Interest
“A big part of the draw for investors are rising office rents,” Fossick said, with the cost of leasing space in the city expected to grow 33 percent between 2019 and 2022. JLL also expects the supply of office space in Singapore’s urban core to remain tight over the next few years as owners of older office buildings capitalize on recent government planning incentives to redevelop their assets as integrated life-work-play buildings.
Colliers International reported ten days ago that Grade A office rents in Singapore’s central business district had hit a ten-year high in the second quarter of this year, growing over 12 percent compared to the same period of 2018 to reach an average of S$9.93 per square foot per month.
With rising rents driving demand, just yesterday Gaw Capital and Allianz announced that they had paired up to buy the Duo complex for S$1.6 billion, netting the new owners 557,972 square feet of office tower and retail gallery for S$2,590 per square foot.
Frasers Property sold a 50 percent stake in Frasers Tower at 182 Cecil Street in Singapore to Korea’s National Pension Service (NPS) for S$442.7 million last month, with the NPS paying the equivalent of S$2,865 per square foot of net lettable area for the 685,886 square foot building.
Three months ago, AEW agreed to pay paid Oxley Holdings S$1.025 billion to buy Chevron House, a 32-storey commercial tower in Singapore’s financial district.