Richard Li’s FWD Group Buying 50% Stake in SG Office Building for $424M

A unit of FWD Group, the insurance arm of Richard Li’s Pacific Century Group, has agreed to purchase a 50 percent stake in a Singapore office building from CapitaLand Commercial Trust for S$591.6 million ($424 million), according to an announcement by the trust’s manager to the Singapore stock exchange today.

CapitaLand Commercial Trust Management, which manages the S$4.8 billion REIT, says it is selling the stake in One George Street to FWD Group in a deal which values the 23-storey office building in Singapore’s Raffles Place financial district at S$1,183.2 million.

The real estate investment follows just over one year after Li’s regional insurance player entered the Singapore market by acquiring a 90 percent stake in medical insurer Shenton Insurance from Parkway Holdings. Richard Li is the son of Hong Kong super-investor Li Ka-shing, and his Pacific Century Group, which already owns Hong Kong’s PCCW telecom provider has been a major investor in mainland China real estate.

2017 Sale Price Edges Out 2008 Purchase Price

FWD will hold its stake in the 51,714 square metre (556,639 square foot) tower through a joint venture with CapitaLand Commercial Trust. A statement from the REIT’s manager says that CapitaLand Commercial Trust expects to recognise an estimated gain of S$84.6 million on its divestment in the circa 2004, SOM-designed office building.

The transaction, which is expected to be completed by mid-June this year, values the property at 16.7 percent above a S$1,014.0 million year-end valuation, and works out to S$2,650 per square foot of net lettable area. Following the deal, CapitaLand Commercial Trust Management will continue to be the asset manager for the property, with sister firm CapitaLand Commercial Management remaining as the property manager.

One George Street was originally developed by CapitaLand and German insurer ERGO, and currently counts Diageo Singapore and plastics manufacturer Borouge among its major tenants. The CapitaLand joint venture sold the property to CapitaLand Commercial Trust in 2008 for S$1.17 billion.

“The divestment of One George Street to OGS LLP is in line with the Trust’s portfolio reconstitution strategy to proactively enhance the value of CapitaLand Commercial Trust’s portfolio and increase our financial flexibility to invest in other compelling and sustainable growth opportunities so as to improve returns to unitholders,” said CapitaLand Commercial Trust Management CEO Lynette Leong, referring to the sale to the newly created joint venture vehicle.

As of 31 March 2017, One George Street was 96.5 percent occupied, according to the vendor’s statement, and contributed 11 percent to CapitaLand Commercial Trust’s net property income in the first quarter of 2017.

Investors Regain Confidence in Singapore Office Market

Richard Li’s decision to buy into the Singapore market comes amid a recent rebirth in interest in the city’s office assets.

In February, Singaporean banking giant DBS Group agreed to sell the PwC Building in the city’s financial district to Canadian insurer Manulife for S$747 million, and CapitaLand itself is currently said to be in exclusive talks with BlackRock to acquire Asia Square 2, a prime office building in the Marina Bay financial district.

Just last week the owners of Shanghai Hengda Group put an office building on Cecil Street in Singapore on the market for a reported S$210 million, or about 40 percent more than the group had purchased it for in September last year.