Frasers Property Selling 50% Stake in S$2B Singapore Tower to Korea’s NPS

Singapore-listed Frasers Property has agreed to sell a 50 percent stake in its namesake office building in the city’s central business district for cash compensation of S$442.7 million ($327.4 million) according to an announcement by the developer late last week.

The company controlled by Thai tycoon Charoen Sirivadhanabhakdi is selling the half-stake in Frasers Tower, a commercial development at 182 Cecil Street in Singapore to Korea’s National Pension Service (NPS) according to sources familiar with the deal who spoke with Mingtiandi. The road to the transaction was made clear after a Frasers-sponsored trust gave up its right of first refusal on the shares in the asset, which measures 685,886 square feet (63,721 square metres) by net lettable area.

The transaction, which values the tower at S$1.96 billion, is the latest in a series of mega-deals for Singapore office properties over the last 18 months, as rising office rents and rebounding capital values continue to draw institutional investors to the Southeast Asian financial hub’s real estate market.

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Frasers sold the half-share in the 99-year leasehold property, which was completed last year, through an issue of new units in Aquamarine Star Trust, a Frasers subsidiary which owns the 38-storey tower. The news of the NPS’ potential involvement was first reported by Singapore’s Business Times.

At the stated valuation, the NPS is paying the equivalent of S$2,865 per square foot of net lettable area in the building, which connects to Tanjong Pagar metro station and was 93 percent occupied as of 31 March 2019, according to documents provided by the company.

Rated as Green Mark Platinum on the Singapore Building and Construction Authority’s ranking system for energy efficient buildings, Frasers Tower has attracted a number of high profile tenants with French energy giant Total and Microsoft Singapore serving as anchor occupiers.

The project, which also includes four floors of retail on its lowest storeys, is also home to engineering firm Arup, insurer Pacific Life and Japanese conglomerate Sumitomo. Asking rentals at the grade A tower average between S$12 to S$15 per square foot per month, according to current online listings.

Frasers had been engaged in talks to sell the building since early this year with NPS said to have been conducting due diligence on the acquisition since the beginning of May.

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Before NPS could acquire its stake, Frasers Commercial Trust (FCOT) had declined to invest in the Frasers Tower opportunity, when Frasers Property, which is the sponsor of the listed trust and controls its manager, having declared its intention to sell the stake in the building on 22 June.

Frasers had originally acquired the former site of the Telok Ayer Performing Arts Centre for S$924 million in 2013, with the project having been designed by Singapore’s DP Architects.

Korea’s NPS has quietly become a major player in international real estate markets in recent years, investing both as a limited partner in pooled funds and making its own investments directly.

In August last year the pension fund manager paid $1.5 billion to purchase Goldman Sachs new London headquarters in a deal which included an agreement to lease back the office building to the investment bank for 25 years.

In mid-2017 LaSalle Value Add mandate, an investment strategy executed by LaSalle Investment Management on behalf of the NPS, bought a prime office complex in Prague from Slovakia’s IAD Investments for approximately 57 million euros ($63.8 million).

That Czech deal came just a few months after the Korean fund manager provided the principal financing for a $525 million million purchase of a 27.6 percent stake in SL Green’s One Vanderbilt Avenue project in Manhattan.

Closer to home base in Seoul, the NPS in October last year teamed up with New York’s KKR and hometown player IGIS Asset Management to acquire a mixed-use real estate project in Seoul’s Gangnam business district at an expected investment amount of approximately KRW 2.1 trillion (then $1.9 billion).