ARA, Chelsfield Test Market for Lazada Headquarters in Singapore

ARA Asset Management and Chelsfield Asia have put Lazada’s corporate headquarters up for sale according to market sources familiar with the matter who spoke with Mingtiandi, with the marketing exercise coming almost three years after they picked up the asset and just 11 months after securing Alibaba and its Southeast Asia subsidiary as anchor tenants.

The joint venture partners have engaged brokerages JLL and Savills to market Lazada One, Mingtiandi has come to understand, after Bloomberg earlier reported that the sellers are seeking around S$800 million ($585 million) for the 241,000 square foot (22,389 square foot) office building at 51 Bras Basah Road.

With industry sources noting that talks are still in the exploratory stages, should the 50:50 joint venture partners succeed in finding a buyer at their asking price of around S$3,319 per square foot, ARA and its UK-based partner would be exiting their investment in the asset at a 44 percent premium to the S$555.5 million which they had paid to acquire office block in early 2019.

ARA and Chelsfield, which declined to comment on the reported sales exercise, have put the 11-storey property on the market after analysts recently reported a sustained recovery in premium office rents, thanks in part to growing demand from global and regional tech firms competing for space in Southeast Asia’s wealthiest city.

Post-Makeover Marketing

In January, ARA and Chelsfield had received a vote of confidence in the value of the property then named 5One Central when Alibaba and its Southeast Asian e-commerce unit Lazada agreed to sign an anchor lease for a combined 140,000 square feet (13,006 square metres) in the office block, which then was rebranded as Lazada One.

That six-year contract, which involved the e-commerce giants reportedly paying around S$8 per square foot in monthly rent for their slice of the property within five minutes’ walk of the Bras Basah and Bencoolen MRT stations, allowed the project owners to fill 60 percent of the asset and brought it close to 100 percent occupancy.

ARA and Chelsfield Asia acquired what was then called the Manulife Centre in January 2019 from SGX-listed builder City Developments Ltd (CDL) and a fund managed by Keppel private equity affiliate Alpha Investment Partners for S$555.5 million (then $408.8 million).

While ARA declined to comment on the reported bid to exit Lazada One, Stephen Tang, who heads value-add and opportunistic real estate for Asia Pacific at ARA’s private fund division, had said in April that his team has upgraded the Bras Basah property to reposition it and make it more suitable for its existing and potential future tenants.

The Singapore-based asset manager, which is currently in the process of being acquired by logistics specialist ESR, used a similar strategy with its 61 Robinson Road asset near Tanjong Pagar, which it agreed to sell for $314.5 million in September of this year. In that disposal the company achieved a 24 percent premium on its purchase price some 19 months earlier, after investing in enhancements in the office property.

“What tenants require today may not be exactly the same as what was required 3-4 years ago, so when we do the AEI (asset enhancement initiative) program and we look for the acquisition, we really see what’s going on locally. How the tenants are viewing it, how the building is positioned vis-a-vis that particular submarket. And try to position it so that it competes on the level that probably is not … from the first requirement,” Tang told an MTD forum.

High Tech, Low Supply

ARA and Chelsfield’s tech-fueled hopes come as Internet firms from Asia and around the world have made the Lion City a preferred headquarters location.

In October, American e-commerce giant Amazon.com moved into a new home in the Asia Square One office tower in Marina Bay, and China’s ByteDance, which produces TikTok, moved into a three floor office at One Raffles Quay late last year.

Real estate agency Savills expects grade A office rents to continue to rise in Singapore’s core commercial precincts calling the city a “natural place” for firms in new economy sectors to set up their bases when they expand in Southeast Asia.

Savills also noted that this expansion is happening as Singapore moves into a potential “severe shortage of space” over the next three to five years, with the property consultancy estimating that new supply of grade A space in the city will average just 660,000 square feet annually from now through 2026.

“This last point is perhaps of great significance because there is a real and present danger that we may see very sharp rental increases in a few years’ time when the slack left from companies right sizing slowly gets taken up and new supply is not coming through when companies wish to expand again,” the report read.