AEW has agreed to sell its second office tower in Singapore’s downtown core this year, as the market for commercial assets in Southeast Asia’s wealthiest city continues to attract global investors.
US private equity giant KKR is paying AEW just less than S$599 million ($441.6 million) for 20 Anson Road in Singapore’s Tanjong Pagar area, according to sources familiar with the transaction, bringing the Boston-based fund manager’s disposals in the Lion City to nearly $813 million in less than two months.
The deal, which was signed during the second half of March and first reported by the Business Times on Friday, is KKR’s first real estate acquisition in Singapore and will give the New York-based firm full ownership of the 20-storey property across the road from Alibaba and Perennial Real Estate Holdings’ AXA Tower project.
With regional and global corporations crowding into Singapore’s office market, the city-state has already recorded eight major commercial transactions – either closed or in process – worth S$6.78 billion ($5 billion) so far this year, which is equal to 80 percent of 2021’s $9 billion total.
A Time to Sell
AEW’s second office divestment so far this year comes after the fund manager agreed to sell 55 Market Street near Raffles Place – around 1.3 kilometres (0.8 miles) from 20 Anson – to a unit of Japanese firm Kajima Corp for S$286.9 million in February.
The selling price for the Tanjong Pagar property, which equates to S$2,376 per square foot of built area, is 16 percent higher than what AEW paid in 2018 when it acquired the 252,069 square foot (23,418 square metre) building from Singapore-listed CapitaLand Commercial Trust for S$516 million.
The 2009-vintage property still has roughly 86 years remaining on its 99-year leasehold, and is zoned for commercial use.
Considering its 27,281 square foot site and maximum allowable plot ratio of 10.5, the building’s current GFA can still be expanded by 13.6 percent to reach 286,450 square feet, based on guidelines issued in the 2019 Master Plan from Singapore’s Urban Redevelopment Authority.
AEW first put the building up for sale in July 2021 and the following month, Hong Kong-based Gaw Capital Partners was reported to be in exclusive negotiations with AEW to purchase Twenty Anson for S$588 million. However, those talks ultimately failed to result in a sale and the exclusivity period lapsed.
Among the top tenants in the property just a few minutes’ walk from the Tanjong Pagar MRT station are car maker Toyota Motor Asia Pacific, global investment giant Blackrock Advisors Singapore and tech firm CSC Technology Singapore.
AEW did not respond to queries at the time of publication while CBRE, which is understood to have brokered the deal, declined to comment.
KKR Lands in Singapore
While KKR representatives declined to comment on the deal, the firm’s head of real estate for Asia Pacific, John Pattar, is reported to be spending time in Singapore these days while Hong Kong sorts out its borders, giving the firm ample opportunity to inspect projects along Anson Road and in other prime locations.
For Pattar and his team, the deal to purchase the office tower marks the latest milestone in KKR’s recent expansion of its real estate investment business in Asia Pacific.
Less than two weeks ago the firm announced that it had agreed to pay $2 billion to take over Mitsubishi Corp-UBS Realty, a joint venture by Japanese conglomerate Mitsubishi Corp and Swiss bank UBS Asset Management. MC-UBSR, which manages a pair of Tokyo-listed real estate investment trusts with a combined $15 billion in assets under management, gives KKR an instant presence in Japan’s real estate fund management universe.
Also this year, KKR signed up to back a pair of Australian logistics projects managed by ESR’s Logos division, and in December of 2021 had entered a China multi-family residential joint venture with local build-to-rent operator Funlive.
In January of last year KKR finished raising $1.7 billion for its KKR Asia Real Estate Partners fund, which pursues opportunistic real estate investments in the region.
With data from Real Capital Analytics showing that the value of commercial real estate acquisitions in Singapore nearly tripled last year to $9 billion, the market’s performance so far in 2022 points to still further increases in mainland Asia’s southernmost point.
In February Lendlease Global Commercial REIT signed Singapore’s biggest deal of 2022 so far with its S$2.08-billion purchase of the Jem commercial complex in Jurong East from entities controlled by its sponsor, LendLease.
This was followed by CapitaLand Investment and its Japanese partners late last month selling 79 Robinson Road to CapitaLand Integrated Commercial Trust (CICT) and a private fund managed by CapitaLand Investment for S$1.26-billion.
At least part of this investor enthusiasm is driven by a brighter picture for office rents, particularly in the city-state’s central business district, where leasing rates rose by 2.3 percent in the first quarter to post the market’s fastest growth rate since 2021, according to research by JLL Singapore.
Leasing rates for Grade A offices in Singapore’s CBD averaged S$10.46 per square foot in the first quarter, compared to $10.23 in the preceding three months to mark the fourth consecutive quarter of rental growth in the area, according to the agency’s figures.