ESR’s ARA Asset Management has divested its half stake in a Singapore office project to a fund backed by Japanese giant Sumitomo Mitsui Finance and Leasing Company (SMFL) for S$362.4 million ($269.3 million), Mingtiandi has learned.
A fund managed by ARA which has SMFL Mirai Partners as a majority shareholder and Tokyo-based Kenedix – which is jointly owned by SMFL and ARA – as a third investor, is buying the half-stake in the newly renovated Lazada One building at 51 Bras Basah Road. Chelsfield Asia, which bought the property together with ARA four years ago, is retaining its 50 percent holding in the building.
The transaction price translates to S$2,790 per square foot of the asset’s net lettable space of 259,800 square feet (24,136 square metres).
“Owing to the fact that Singapore has a competitive advantage in Asia and its real estate market is expected to pick up on the back of economic recovery, the three companies decided to jointly invest in Lazada One as the second property in their partner strategy with ARA being the fund manager,” the investors said in a joint statement issued Tuesday.
ARA is selling down its stake in Lazada One after completing major renovations early last year and securing e-commerce giant Alibaba and its Southeast Asian unit Lazada as anchor tenants.
The 11-storey building near Singapore Management University is currently at 98 percent occupancy, with top tech names, such as streaming giant Spotify and online apparel marketplace Zalora, also having corporate homes in the property.
Market sources said monthly rental rates in Lazada One average around S$9.00 to S$9.50 per square foot with the property generating rental income of about S$2.4 million a month, which translates to a 3.2 percent rental yield.
ARA’s partial share sale values the asset at roughly S$725 million, which is a 9.4 percent markdown from the S$800 million ARA and Chelsfield had initially asked for when they started marketing the asset a year ago, but still 30 percent higher than what the partners paid to acquire what was then known as the Manulife Centre in 2019.
With Manulife set to move out of the property, the pair had purchased the asset for S$555.5 million and took out a S$385.8 million green loan a year later to finance the acquisition and upgrade the property.
Following the acquisition, ARA will continue to serve as asset manager for the property.
It is understood that JLL and Savills were appointed to market the property but both brokerages declined to comment on the transaction.
ARA to SMFL Pipeline
The investment in Lazada One comes just over a year after SMFL Mirai, a real estate finance subsidiary of SMFL, had teamed up with ARA and Kenedix to purchase a half stake in the Capital Square office tower near Raffles Place in Singapore for S$270 million.
That deal, which also featured ARA as the seller, saw SMFL Mirai taking a 91 percent stake in the pooled fund which purchased the building at 21 Church Street.
The 16-storey office building also has ARA as its asset manager and is just five minutes’ drive from Lazada One.
The trio said they will continue to look for more investment opportunities to further expand their investment and financing business in Asia.