Gaw Capital, Allianz Close in on S$1.5B Purchase of Singapore’s Duo Project

Gaw Capital Partners is leading an investor consortium that has entered into advanced negotiations for the acquisition of the Duo Tower office building and the connecting Duo Galleria shopping centre for a sum in excess of S$1.5 billion ($1.1 billion), according to sources familiar with the discussions who spoke with Mingtiandi on condition of anonymity.

The Hong Kong-based fund manager is said to have backing from Allianz Real Estate, the property investment arm of the European insurance titan, in its discussions with the commercial complex’ current owner – a joint venture between Malaysian sovereign fund Khazanah Nasional Bhd and Singapore government investment powerhouse Temasek Holdings.

The discussions, which are expected to result in the conclusion of a sale and purchase agreement shortly, come approximately seven months after the project in Singapore’s Bugis area was put on the market, with a local hotel investment specialist said to be closing in on a purchase of the Duo’s hotel component at the same time.

Bugis Project Achieves Top-Level Rents

Gaw Capital’s latest target acquisition is a 624,000 square foot (57,971 square metre) complex that was completed in 2017. A report from property consultancy Cushman & Wakefield in March this year described the 568,000 square foot office component as 97 percent occupied.

The retail component of the project covers 56,000 square feet with the Duo Galleria mall hosting a variety of food and beverage operations including the tony Tono Cevicheria and the now ubiquitous PizzaExpress. Gaw’s potential purchase of the complex with Allianz’ involvement was first reported in Singapore’s Business Time.

Should the acquisition be completed at S$1.5 billion, the new buyers would be paying the equivalent of S$2,404 per square foot for the combined complex, with the office space commanding rents of S$12 per square foot per month this year according to C&W – a rate on par with rents in the city’s priciest submarket, Marina Bay.

Corporate Giants Move to Fringe of SG’s Downtown Core

The current owner M+S Pte, an eight-year-old investment joint venture set up by the Malaysian and Singapore government funds, got leases rolling at the Duo project by luring US pharma giant Abbott Laboratories to rent 100,000 square feet as the building’s anchor tenant, with Mastercard occupying another 74,000 square feet and Chevron abandoning its namesake tower in Raffles Place to take up another 72,000 square feet at the Duo.

An upswing in office rentals across Singapore over the past 18 months has helped drive up interest among investors for office properties across Southeast Asia’s wealthiest economy, with M+S having retained property consultancy JLL to advise on the project’s sale last year.

Gaw’s play for the Ole Scheeren-designed Duo project is close to succeeding just four months after the private equity real estate specialist completed its S$710 million acquisition of Robinson 77, an office building in Singapore’s Tanjong Pagar area at the end of January.

CapitaLand Commercial Trust had earlier been reported to have engaged in discussions with M+S for acquisition of the Duo’s commercial component, however, those talks failed to result in an agreement. The complex along Rochor road and Fraser road includes a separate 50-storey residential tower that was developed as condominiums.

Gaw-Allianz Relationship Deepens

The offer for the Duo project is the latest in a series of team efforts by Gaw and Allianz, with the Munich and Paris-based insurer also having purchased a 50 percent stake in a China logistics real estate joint venture owned by the Hong Kong fund manager and Italian developer Vailog in November last year.

Market sources have also indicated to Mingtiandi that Allianz backed Gaw Capital’s HK$4.75 billion ($605 million) purchase of the 625 King’s Road office tower in Hong Kong’s North Point area last month from a Swire Properties joint venture.

In 2017 Allianz had taken a 30 percent stake in a $550 million funding round for the ERES APAC II – China Outlets, an outlet mall fund backed by Gaw and TH Real Estate to expand the chain of Florentia Village luxury outlets managed by RDM Asia.

Andaz Hotel Close to Sale

In a separate transaction, RB Capital – a property investment firm affiliated with hotel and commercial developer Royal Holdings – is understood to be close to signing an agreement to acquire the Andaz Hotel for S$480 million. RB was reported to be in due diligence for a potential purchase of the hotel as early as February of this year.

The Andaz, which opened in 2017 as the first foothold for the trendy Hyatt marque in Southeast Asia, shares the Duo tower with the project’s office space and offers 340 rooms and a 14,800-square-foot events “alleyway.”

While the parties involved have yet to finalise terms, at the reported price, RB Capital would be paying the equivalent of S$1.4 million per key for the luxury property. RB was set up as a property and hotel investment firm in 2006 by Kishin RK, son of Singapore hotel tycoon Raj Kumar, whose Royal Holdings includes the Park Hotel in Singapore’s Farrer Park and the Intercontinental Hotel on Robertson Quay in its portfolio.