Robinson 77 is on the market for S$725 million ($530 million), less than two years after a CLSA fund bought the property for S$530.8 and just over a decade after another CLSA investment vehicle bought and resold the building within a ten-month period.
This latest potential deal, which if completed would be Singapore’s largest office building transaction so far in 2018, is getting a good reception from potential investors, according to brokers representing the private equity firm in an Expression of Interest exercise (EOI).
“We are seeing a broad cross section of interest,” Greg Hyland, International Director and head of JLL’s Capital Markets in Singapore, told Mingtiandi. “We are seeing strong local interest and interest from Hong Kong, China and Korea.”
The Business Times reported on 2 August that Robinson 77 is available, and JLL confirmed that the property is now for sale. JLL and CBRE are jointly marketing the property, and the EOI is expected to conclude by the end of September. Sources at CLSA Real Estate declined to comment when contacted by Mingtiandi.
S$194M Jump in Price Tracks SG Market Recovery
The S$194 million jump in price for the 35-storey office tower over the past two years reflects both a change in the market from its 2016 nadir and improvements made in the building near Tanjong Pagar MRT station.
The investor converted about 15,000 square metres of carpark into office space boosting its net leasable area to 307,585 square feet (28,575 square metres), up from 293,269 square feet when CLSA acquired the building. At the S$725 million asking price, the buyer of Robinson 77 would be paying S$2,357 per square foot.
Some changes were more superficial, including re-cladding the tower, which has 90 metres of frontage on Robinson Road, and renaming the building as Robinson 77 from 77 Robinson Road. The Business Times reports that the seller spent at least S$30 million on renovations.
Tenants at Robinson 77 include Adidas, Dentsu, Yamaha Motor Asia, Nikko Asset Management Singapore, Michelin Asia-Pacific and Westpac Banking Corporation. Regus hosts a serviced office and coworking space in the building.
CLSA Aims to Flip the Same Building Twice
If the deal is completed at or near the expected price, the transaction would be Singapore’s largest office deal so far in 2018, larger than the S$516 million sale of Twenty Anson to AEW in June and surpassing the expected sale of Manulife Centre, which is under due diligence by the UK’s Chelsfield and predicted to go for S$550 million. Other recent deals include 55 Market Street, a 16-storey commercial building with 15 floors of offices, which went for S$216.8 million, or S$3,020 a square foot, in July.
The building, which was first-known as the SIA Building after it was built by the parent company of Singapore Airlines in 1997 and which is on a 99-year lease running from 1994, was sold by Singapore Airlines to CLSA-managed TSO Investment in June 2006 for S$343.88 million, or about S$1,165 per square foot. SIA has the building on its books for S$118.77 million.
The CLSA fund then turned around and sold the asset to a fund managed by SEB ImmoInvest in April 2007 for S$526 million, with the manager of that fund going on to sell the building to a fund managed by CLSA Capital Partners in 2016 for S$530.8 million after Cordea Savills acquired the German real estate fund management business and its funds in 2015.
SG Office Market on an Upswing
The exit yield for Robinson 77 would be sub-3 percent, while the forward yield will be 3-3.5 percent, according to DBS Group Research, which puts the potential transaction on a par with other recent deals in the market. The exit yield for 55 Market Street was 1.7 percent and for Twenty Anson 2.7 percent. DBS expects the Manulife Centre transaction to be priced in the mid-2 percent range.
JLL research shows that Singapore’s grade A office rental rates recovered from a low of S$8.41 per square foot per month in the first quarter of 2017 to reach S$9.71 in the second quarter of 2018. Although market rents are still below 2015 levels and have not yet rebounded to their 2008 highs of S$15.00, a dearth of new projects coming on the market within the next two years has investors optimistic about a continuing recovery in rents going forward.
“If you look at the Singapore market, it is on an upswing.” said Hyland. “The supply overhang was of a shorter duration than expected.”