Just two months after Singapore developer Low Keng Huat hired away a top executive from local investment firm Sun Venture, the two companies are swapping stakes in a pair of long-standing joint ventures.
Low Keng Huat announced to the Singapore exchange on Friday that it had agreed to sell its 40 percent interest in the Westgate Tower office building to Sun Venture for S$97.1 million ($73.2 million), giving that company full ownership of the Jurong East office tower.
In the same notice, the listed builder said it would be purchasing Sun Venture’s 45 percent stake in the Paya Lebar Square mall for S$90.5 million.
The transactions are part of a strategy to shift Low Keng Huat’s focus away from office projects in favour of retail developments, the listed developer said in its statement to the exchange.
Out of Office
Low Keng Huat’s deal with Sun Venture makes it the latest investor to bet on the future of community retail in Singapore, as the luxury sector loses its lustre.
“As Singapore gradually emerges from the pandemic, neighbourhood malls with strong fundamentals are very desirable as they offer essential services and thus generate an attractive property yield,” said Galven Tan, deputy managing director of investment sales and capital markets at Savills in Singapore.
Less than three months ago, Arch Capital on behalf of a German investor agreed to invest $164 million to acquire the YewTee Point mall in western Singapore from Frasers Centrepoint Trust, with that grocery-anchored property primarily serving local shoppers in the city’s Choa Chu Kang area.
Frasers Property has also made community retail a focus in Singapore, including spending about S$1 billion in 2019 to buy a controlling stake in a PGIM retail real estate fund that owns a set of six Singapore shopping malls.
In addition to the Paya Lebar property, Low Keng Huat owns the BT Centre at 207 Balestier Road near Novena and the retail podium of the lyf@Farrer rental apartment complex at 2 Perumal Road near the Farrer Park MRT station.
Shopping in Paya Lebar
In Paya Lebar, a one-time industrial area at the northeastern fringe of Singapore’s urban core, Low Keng Huat will soon have 100 percent ownership of a retail asset just across the street from Lendlease’s 340,000 square foot (31,587 square metre) Paya Lebar Quarter shopping mall.
Completed in 2014 on a 99-year-leasehold plot, Low Keng Huat’s shopping destination measures 95,475 square feet by net leasable area and is dominated by food and beverage outlets, with some health and beauty providers and a ValuDollar location added to the mix.
In addition to acquiring all 159 units in the strata-title mall, the agreement also provides Low Keng Huat with a single office unit. The Paya Lebar area has been targeted by Singapore’s Urban Redevelopment Authority for transformation into a pedestrian-friendly commercial precinct.
Under the terms of the agreement, the two sides have agreed on a property value of S$360 million for the Paya Lebar properties.
Dealmaker in the Spotlight
The deals follow Low Keng Huat’s announcement in early April that the company had recruited Alvin Teo, formerly the head of real estate for Sun Venture, to join as an executive director.
Under Teo’s leadership, Sun Venture had worked with Low Keng Huat and local engineering firm Guthrie to develop the 13-storey Paya Lebar Square complex. After selling off the office units on a strata-title basis, Low Keng Huat retained its 55 percent stake in the retail element.
In Jurong, Low Keng Huat had teamed up with Sun Venture to purchase Westgate Tower from Temasek-controlled real estate giant CapitaLand and a pair of its REIT affiliates for S$579.4 million in 2014.
Under the terms of the agreement just announced, Sun Venture will take sole possession of 295 office units in the 20-storey office tower at 1 Gateway Drive in Jurong East. The deal values the office properties at S$310 million.
At present, the Westgate companies collectively own 295 office units in the tower. Meanwhile, Paya Lebar Square Pte Ltd owns 159 retail units and one office unit in the mixed-use development at 60 Paya Lebar Road.
The transactions are expected to be completed on or about 29 June.
Note: This story has been updated to identify the buyer of the YewTee Point mall as Arch Capital, which is managing a fund on behalf of a German investor. An earlier version had named a fund managed by DWS. Mingtiandi regrets the error.