TripleOne Somerset is located along Singapore’s prime commercial strip
Billionaire Stanley Ho’s Shun Tak Holdings has made its first major commercial acquisition in Singapore after the Hong Kong-listed company acquired a 61 percent stake in a commercial project along the city’s famed Orchard Road commercial strip.
Shun Tak paid S$305 million ($216 million) to acquire the stake in TripleOne Somerset from Singapore’s Perennial Real Estate Holdings and six other companies that had invested in the 766,549 square foot (71,000 square metre) project, according to a statement by Perennial to the Singapore stock exchange. The company controlled by the Macau gambling magnate had already held a nine percent stake in TripleOne Somerset through a subsidiary, bringing Shun Tak’s final holdings in the development to 70 percent.
Shun Tak’s investment is the latest in a streak of commercial deals in the southeast Asian financial hub as office vacancy levels rise and the market gets ready for an influx of new projects.
Perennial Picks Up S$34 Million on Disposal
Perennial, which has a combined portfolio of more than 45 million square feet across Singapore, China and other locations, made the disposal together with project partners SingHaiyi Group Ltd, Boustead Projects Ltd, Breadtalk Group Ltd, Shun Fung Holdings (Private) Ltd, ROOI Holdings Pte Ltd and Grandma’s Holdings Ltd. Simply Swift Ltd, an indirect wholly owned subsidiary of Shun Tak was responsible for the acquisition.
Pua Seck Guan, chief executive officer of Perennial, said, “The divestment of our partial stake in TripleOne Somerset is in-line with our capital recycling strategy to extract value and maximise returns for shareholders.” The company will retain a 30 percent stake in the building, and will continue to be the asset manager and property manager for the circa-1977 development.
The Singaporean firm had assembled a consortium of investors to acquire the one-time Singapore Power Building in 2013 for S$970 million. The stake disposal values the property, which includes 494,463 square feet of office space by net lettable area, and another 70,360 square feet of retail at approximately S$1.258 billion. The valuation translates to a divestment price of S$2,200 per square foot of net lettable area.
The divestments are expected to be completed no later than June 30, 2017 with Perennial bringing in approximately S$34.3 million from divestment of its own 20.2 percent stake. In its statement to the exchange the company said it plans to put its share of the proceeds into funding existing or future investments.
Falling Rents and Rising Supply Trigger Singapore Investment Activity
The acquisition by Shun Tak is the latest in a flurry of Singapore commercial transactions, as investors seem ready to call a bottom to the city’s commercial market.
In the fourth quarter office occupancy fell to 88.9 percent from 89.6 percent in the third quarter, according to government data, suggesting that rental yields are already declining.
Deutsche Bank expects net supply of Grade-A office space in Singapore to rise 117 percent this year, and the result appears to be a newfound willingness among investors to part with prime assets.
During January an affiliate of Abu Dhabi sovereign fund ADIA invested $176 million in a Singapore joint venture with industrial developer Boustead, just weeks after CLSA Capital Partners bought a 35-storey office tower on 77 Robinson Road in downtown Singapore for $373 million.
During 2016 the Qatar Investment Authority bought Asia Square 1 in Singapore from Blackrock for $2.45 billion in one of the biggest commercial property transactions of last year.
Unless my math is wrong, this 61% investment of $216 mil USD means the current total value of the property is $355 mil USD compared to the $766 mil USD price paid in 2013? What am I missing? Or is this one huge drop in value?
The developer has recently been selling off floors in one of the towers on a strata title basis, which changes the math on the transaction significantly compared to when the complex was purchased in 2013.