TE Capital, LaSalle Close on $240M Buy of Singapore’s PIL Building

Local private equity firm TE Capital Partners and LaSalle Investment Management have completed the acquisition of an office building on Cecil Street in downtown Singapore for S$323.8 million ($240.6 million), in a bid to ride an office market recovery driven by an expected surge of tech and finance occupiers.

A joint venture between TE Capital and LaSalle bought the PIL Building, a 17-storey freehold office block at 140 Cecil Street in Singapore’s central business district (CBD), from cash-strapped shipping firm Pacific International Lines (PIL), with plans to redevelop the 40-year old asset.

“On behalf of our shareholders and investors, we are pleased to add this strategic asset in Singapore to our assets under management via this JV with LaSalle Investment Management,” TE Capital Managing Director Emilia Teo said in a statement on Tuesday. “We have seen increasing office demand in the Singapore CBD from the technology and financial services tenants and are expecting a moderate level of new supply coming into the market in the next few years.”

The sealed deal comes amid a surge of value-add investments in Singapore by fund managers searching for higher yields and hoping to leverage government incentives for renovating or rebuilding aging assets.

Prime Asset Planned

TE Capital and LaSalle paid around S$2,198 per square foot of the property’s existing 147,315 square feet (13,686 square meters) of gross floor area based on Mingtiandi calculations, which is around 7.5 percent lower than the initial asking price of S$2,376 per square foot when the building was put on the market for S$350 million in mid-2020.

The building has the potential to be redeveloped into a 30-storey commercial building with a gross floor area of 218,434 square feet based on the government’s 2019 Master Plan.

The JV, with TE Capital acting as the operating partner, will be redeveloping the property into a grade A office building with ceiling heights of 4.9 metres and floor plates that can accommodate single or multiple tenants, while aiming to achieve a Platinum certification under Singapore’s Green Mark standard for sustainable buildings.

Sitting on a 19,539 square foot (1,815 square metre) freehold land parcel in Singapore’s downtown core, the PIL building is just eight minutes’ walk from four major transit stations including Tanjong Pagar MRT, and within a 10 minute stroll of major office towers along Robinson Road such as CapitaLand’s Capital Tower and Gaw Capital’s Robinson 77.

“This asset is a welcome addition to our portfolio as we continue to witness increasing participation from global institutional investors in the Singapore office sector and sustained occupier demand from global tech companies and financial institutions amidst the pandemic,” said Claire Tang, co-chief investment officer for Asia Pacific at LaSalle, a Chicago-based real estate investment giant with $73.4 billion of assets under management.

The transaction also involves a short-term leaseback by the previous owner, PIL which has been using the property as its headquarters.

According to the news release, TE Capital and LaSalle made the acquisition on behalf of funds under their management, with Cushman & Wakefield having brokered the deal

Office Market Still Buoyant

TE Capital Managing Director Terence Teo said the new asset should allow the JV to “capitalise on an upswing in the Singapore office market,” after the city-state ranked as the fifth most active real estate hub in Asia Pacific last year according to Real Capital Analytics’ latest tally, with the total volume of transactions nearly tripling to $9 billion in 2021.

With many assets along Robinson Road and neighboring streets between Raffles Place and Tanjong Pagar showing their age, the commercial strip has become a favoured hunting ground for investors, according to Shaun Poh, head of capital markets for Singapore at Cushman & Wakefield, who noted that many sites in the area have freehold titles, while incentive schemes offered by Singapore’s Urban Redevelopment Authority can offer higher plot ratios to owners of old buildings in the CBD interested in redeveloping their properties.

“You rarely see a lot of freehold commercial sites in CBD locations and most of the freehold sites can mostly be found in these sites – Shenton Way, Cecil Street, Robinson Road – that’s why it’s more attractive.” Poh said on Tuesday. “There is strong growth in rental in the CBD area and a lot of investors are taking advantage of that. Singapore has also been a safe haven, especially for office assets.”

Investor interest in the area the area has been underlined by a series of deals along the strip in recent months, including German investment manager AM Alpha closing on its S$269.7 million purchase of Robinson 112 – an office asset just two blocks away from the PIL Building – in December.

In September last year, ARA Asset Management, which has since been acquired by ESR, sold 61 Robinson Road to local financial management startup Rivulets Investments for a reported S$422 million.