Gaw Capital Partners has closed on the acquisition of Robinson 77, an office building in Singapore’s Tanjong Pagar area, from a fund managed by CLSA Capital Partners, according to sources familiar with the transaction who spoke with Mingtiandi.
In the deal which was finalised on Thursday, CLSA Capital, a fund manager controlled by China’s CITIC Group, achieved a price of approximately S$710 million ($526 million) for the 35-storey grade A property just over two years after acquiring the building for S$530 million.
For Gaw Capital, the acquisition gives the Hong Kong-based fund manager its second commercial asset in Singapore after office rents increased 7.4 percent last year in the face of a supply shortage and increasing demand from occupiers.
CLSA Notches 25% Gain in Two Years
For CLSA the disposal is an opportunity to record a capital gain of just over 25 percent on the deal which was originally signed in late December.
After purchasing the building then known as 77 Robinson Road from a fund managed by Savills Investment Management for S$526 million in November 2016, CLSA had invested an estimated S$30 million in renovations of the property.
In upgrading the 1998-vintage tower CLSA converted about 15,000 square metres of carpark into office space, a move which boosted the property’s net leasable area to 307,585 square feet (28,575 square metres), up from 293,269 square feet when CLSA acquired the building.
Some changes were more superficial, including re-cladding the tower, which is owned via a 99-year lease running from 1994, and renaming the building as Robinson 77 from 77 Robinson Road.
At S$710 million, the transaction for the tower once known as the Singapore Airlines building would be equivalent to just over S$2,308 per square foot of net lettable area, and the initial yield is said to be approximately three percent.
In June last year US fund manager AEW had paid the equivalent of S$2,503 per square foot of net lettable area to purchase 20 Anson, a 20-storey office building six minutes walk south of Gaw’s new prize along Robinson Road.
CLSA in August had retained CBRE and JLL to facilitate the sale of the property through expressions of interest at an initial asking price of S$725 million. Gaw Capital was advised on the transaction by Singapore law firm Rajah & Tann.
Executives at CLSA Capital had not responded to inquiries by Mingtiandi before time of publication.
Office Demand Grows in Singapore
The property also benefited from the ongoing expansion of Singapore’s prime office market into the Tanjong Pagar area, one metro station south of the city-state’s primary financial district in Raffles Place.
Just less than two years ago developer Ascendas-Singbridge (soon to become a unit of CapitaLand) broke ground on the redevelopment of 79 Robinson Road, next door to Robinson 77, and is currently building a 500,000 square foot (46,500 square metre) prime office project on the site of the former CPF Tower.
Office rentals for grade A space in the Tanjong Pagar area now average around S$8.00 to S$9.00 per square foot per month according to JLL with vacancy rates at around five percent. The anchor tenant at 77 Robinson is sportswear maker Adidas with local fund manager NTUC Link also occupying significant space in the tower.
Gaw Expands Singapore Foothold
For Gaw Capital, which closed on $1.3 billion in funding for its Gateway Real Estate Fund VI in October last year, the deal represents a chance to expand its Singapore portfolio as the city’s commercial market continues a more than year-long upward trend.
“We are pleased to expand our presence in Singapore with the latest acquisition of 77 Robinson,” Imelda Tham, managing director for investment at Gaw Capital Partners told Mingtiandi. “We believe that this is an opportune time to enter the market as the office sector is at the beginning of a multi-year upcycle. The Tanjong Pagar submarket has also experienced a positive transformation over the past few years as new developments entered the market and re-rated the area. With its prime location and strong tenant mix, this asset will be a strong addition to our diversified Singapore portfolio.”
In late 2017 the Hong Kong firm headed by Goodwin Gaw had purchased the nine-storey office and retail PoMo complex in Singapore’s Doby Ghaut area for S$342 million from a joint venture between Enviro-Hub Holdings, a recycling and property group, and Singaporean developer BS Capital.
In 2015 the private equity firm had purchased the former Big Hotel in Bencoolen for S$203 million, which it has since refitted and renamed as Hotel G Singapore.
Office Shortage Boosts Singapore Investment Opportunities
Office tenants in Singapore are now committing to new premises as much as 24 months in advance, according to market sources who spoke with Mingtiandi, as vacancy rates in commercial districts fell to just over five percent by the end of the year.
According to a report published last month by JLL, capital values in the city’s office market grew by 3.3 percent in the fourth quarter, compared to the previous three months, with Colliers reporting that rents in top locations grew by approximately 15 percent in 2018.
ARA Asset Management and UK-developer Chelsfield, which teamed up last month to buy the Manulife Centre in Singapore for S$555 million, indicated at the time that they expect prime office rents in the city to rise by at least 20 percent through 2020.
The increase in rents is driven both by expanding demand and a shortage of new projects, with the city’s 2019 government land sale program including no new commercial sites in downtown areas, with no major commercial plots having been sold in Singapore’s urban core since October 2017.