CapitaLand Investment and its Japanese partners have agreed to sell 79 Robinson Road in Singapore’s downtown core for S$1.26 billion ($930 million) to CapitaLand Integrated Commercial Trust (CICT) and a private fund managed by the Temasek Holdings-backed giant.
In a statement, Capitaland Investment (CLI) proclaimed the sale of the year-and-a-half old property to its primary commercial REIT and CapitaLand Open End Real Estate Fund (COREF), a year-old open-end vehicle also sponsored by the SGX-listed firm, as evidence of its ability to monetise projects.
“CLI’s divestment of its interest in 79 Robinson Road to CICT and COREF demonstrates the disciplined execution of our strategy to convert balance sheet assets into funds under management that generate recurring fee-related earnings,” Jonathan Yap, CapitaLand Investment’s chief executive officer for fund management, said in an announcement on Friday.
The divestment was helped along by a Singapore office market which has witnessed a surge of interest in this year as office rents in the city’s central business district are expected to increase by 6.9 percent to an average of S$11.55 per square foot per month by year’s end to return to pre-pandemic levels, according to Tricia Song, research head for Southeast Asia at CBRE.
The property, which receiving its temporary occupancy permit in April 2020 and had its grand opening earlier this year, is now 93 percent leased to 22 tenants which primarily come from the finance, consultancy, property and tech industries. European insurer Allianz, data centre provider Equinix Asia Pacific and consulting firm Boston Consulting Group anchor the building and provide nearly half of the asset’s gross rental income.
CBRE’s Song predicts that Singapore’s office leasing market will maintain its recovery momentum this year as relaxation of pandemic restrictions allows more workers to return to the workplace while the city’s reputation as a regional business hub will continue to attract tenants looking for premium space.
“While hybrid working could keep the overall office demand footprint below pre-pandemic levels, CBRE Research expects further rental growth in the mid-term, supported by the rapid expansion in demand from the technology sector and limited new supply,” Song said on Monday. “This will be led by the Grade A market in Core CBD.”
Song said that “flight-to-quality” relocations will be a major driver for the market as occupiers are now more willing to pay higher prices for the right space.
“A heightened emphasis on sustainability and wellness will also trigger upgrading to green buildings,” she said. “With new and expansionary demand from technology occupiers and a broad-based economic recovery, the office market is poised to benefit from employment gains.”
CapitaLand Investment’s partners, Mitsui and Tokyo Tatemono, which backed the project’s development, are exiting together with the Singaporean firm, with CICT taking a 70 percent stake under the new ownership scheme, with COREF taking the remaining 30 percent.
The CapitaLand sponsored funds are purchasing the leasehold building in the Tanjong Pagar area at the equivalent of S$2,423 per square foot for its 514,950 square feet (47,840 square metres) of office space and 4,999 square feet of retail accommodation.
Build and Sell
Located on the site of the former CPF Building across the road from the Tanjong Pagar MRT station, 79 Robinson Road will eventually have a direct underground connection to the transit hub. Ascendas-Singbridge had acquired the project for S$550 million in 2015, before it later merged with CapitaLand.
The tower, which has 45 years left on its 99 year land tenure, was acquired at a 4 percent yield on a net property income basis and has a weighted average lease expiry period of 5.8 years.
With the deal scheduled to close during next quarter, CapitaLand Investment said it is set to receive proceeds worth S$391 million and realize around S$72 million in gains on the transaction. Yap said the fund manager will continue to receive recurring income by providing asset and property management services to the new owners.
Ascendas-Singbridge had also worked together with Mitsui in developing the Galaxis office block in Singapore’s One-North area before the Japanese firm sold its 25 percent stake in that project to CapitaLand-sponsored Ascendas REIT for S$102.9 million in 2020.
Construction work on the building kicked off in 2017 after the Mitsui, Tokyo Tatemono and Ascendas-Singbridge JV demolished the former CPF building that year, with the project completed in April 2020.
The new office trophy will add to CICT’s portfolio of CBD office towers which already includes the 46-storey Asia Square Tower 2 in Marina Bay and the 52-floor Capital Tower along Robinson Road.
For the minority stakeholder, CapitaLand Investment said its sponsored private fund COREF has a mix of unnamed Asian and European institutional investors and has received capital commitments worth almost $500 million so far for its first closing. The vehicle where the Singaporean fund manager has a 10 percent stake, is aiming to raise up to $1.5 billion.
The little-known fund had already been seeded with stakes in a pair of office assets in Yokohama, Japan, including the 17-storey Yokohama Blue Avenue building and the 1993-vintage Sun Hamada office block. With 79 Robinson Road now being added to its assets, the fund’s portfolio will have a combined gross asset value of $490 million.