JP Morgan, Nuveen Buying SG Office Tower From CICT and FWD for $950M

SGX-listed CapitaLand Integrated Commercial Trust and insurer FWD Group have agreed to sell their respective half-stakes in a Singapore office building for a total consideration of S$1.28 billion ($950 million), with a Mingtiandi source identifying the buyer as a joint venture of JP Morgan Asset Management and Nuveen Real Estate.

CICT will receive 50 percent of the consideration, amounting to S$640.7 million, for the sale of One George Street in Raffles Place, the trust’s manager said Monday in a release. Mingtiandi understands that JP Morgan Asset Management and Nuveen each hold 50 percent stakes in the joint venture set up to acquire the 2004-vintage tower.

The 23-storey building has a net lettable area of 445,735 square feet (41,410 square metres), meaning the buyer is paying S$2,875 ($2,128) per square foot of NLA. Based on annualised year-to-date net property income and the consideration, the exit yield is 3.17 percent.

“Divesting CICT’s 50 percent stake in One George Street is the start of our portfolio reconstitution journey which will take time to execute,” said Tony Tan, CEO of the trust’s manager. “While we have shared the upgrading and positioning of the tenant mix plan for the retail space in Raffles City Singapore in 2022, we continue to find and evaluate compelling portfolio value-adding opportunities in Singapore and overseas developed markets.”

Richard Li Moves On

The One George Street acquisition comes just over two months after Nuveen raised an additional $213 million for its core Asia Pacific fund, with the company having named Singapore, along with Seoul and Sydney, as among its target markets. Nuveen representatives had not commented in response to inquiries from Mingtiandi by the time of publication, and JP Morgan Asset Management declined to comment.

One George Street was originally developed by CapitaLand and German insurer ERGO. The joint venture sold the property in 2008 for S$1.17 billion to CapitaLand Commercial Trust, which last year merged with CapitaLand Mall Trust to become CICT.

CICT and FWD had engaged CBRE to market the property, ultimately resulting in disposal.

FWD, the insurance arm of Richard Li’s Pacific Century Group, bought its 50 percent stake in One George Street from CapitaLand Commercial Trust in 2017 for S$591.6 million ($424 million). Li is the son of Hong Kong billionaire Li Ka-shing.

Singapore’s Business Times reported earlier this year that FWD had been tipped to move into One George Street but never did so.

The just-announced transaction would represent a 9 percent premium to the property’s open market value of S$1.175 billion as of 30 September, based on a Knight Frank valuation. One George Street’s occupancy rate was 96.9 percent as of 30 September, and net property income for the year to date through September was S$30.4 million.

The building’s tenants have included ERGO, distiller Diageo, plastics maker Borouge, Lloyds of London, Royal Bank of Scotland and Fitness First. The property also houses Canada’s embassy in Singapore.

Financial Flexibility

CICT’s manager said the net proceeds for the trust from the One George Street divestment would be S$344.8 million. The sale is expected to give CICT greater financial flexibility to repay debt, finance capital expenditure and asset enhancement works, make investments and finance general corporate and working capital requirements.

The planned disposal comes after Grade A office rents in Singapore’s central business district continued to recover in the third quarter, rising 0.5 percent from the previous three months to an average of S$9.64 ($7.12) per square foot per month, according to a Cushman & Wakefield report.

In Raffles Place, third-quarter rents averaged S$9.57 ($7.07) per square foot per month, up 0.3 percent from the previous quarter, with a vacancy rate of 8.8 percent and no new office space planned or under construction.

“While CBD Grade A vacancy rates continued to climb to 5.8 percent in Q3 2021, we expect these rates to narrow going forward,” Cushman said. “A substantial amount of Grade A vacant spaces are currently under negotiation and are likely to be snapped up over the next few months.”