Troubled Shipping Firm Puts Singapore Office Building on the Block for S$350M

Financially troubled Pacific International Lines, Singapore’s largest container shipping company, has put its office building near the city’s Raffles Place central business district on the market for an indicative price of S$350 million ($252 million), a source familiar with the transaction told Mingtiandi.

The 17-storey building at 140 Cecil Street is primarily occupied by PIL, which has been streamlining its operations since the 53-year old firm pulled out of the transpacific shipping market in February as the Covid-19 pandemic spread around the world. The loss-making company has also been divesting some of its vessels and is currently in talks with a unit of Singapore government-owned investment firm Temasek for a $400 million capital injection.

Based on the indicative price and the building’s existing net lettable area of 107,200 square feet (9,959 square meters), the property is being sold at S$3,265 per square foot, according to Mingtiandi’s calculations.

While the indicative price looks high compared to recent transactions in the area, such as ARA Asset Management’s S$340 million purchase last December of the Robinson Centre, which changed hands at S$2,570 per square foot, some brokers believe the price to be fair considering the redevelopment potential of the building.

Buyers Eye Redevelopment Potential

“The more enthusiastic bidders would look at the potential buildable space and that would show the price to be more reasonable,” said Regina Lim, Singapore-based head of capital markets research for Asia Pacific at JLL. “There are high net worth investors and family offices from Taiwan, Hong Kong and South Korea looking for investment opportunities in Singapore. The PIL building is a very digestible size for such investors.”

Cushman & Wakefield, which is handling the sale of the PIL Building, has been marketing the property since May, a source told Mingtiandi. At the close of the bidding on Friday, about eight parties expressed interest to purchase the asset, the Business Times reported on Monday. PIL declined to comment for this story, while a representative from Cushman & Wakefield didn’t reply to Mingtiandi’s emailed query.

According to a term sheet obtained by Mingtiandi, the property 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 — a nearly 33 percent boost from the building’s current GFA of 147,315 square feet.

While the sale comes at a challenging time amid the economic fallout from the Covid-19 pandemic, the limited supply of commercial properties in Singapore continues to drive a favourable outlook for assets in the CBD, where no new sites have been made available over the past past three years, JLL’s Lim said.

Singapore Office Outlook Remains Bright

“The government has also been encouraging owners of ageing buildings that are more than 20 years old to redevelop their properties with incentives such as higher plot ratios,” Lim said. “There will be a lot of demolition and less office space in the next few years due to the redevelopment of these older buildings. The outlook is looking very favourable.”

Under the government’s master plan, owners of office buildings in the older parts of the CBD are encouraged through provision of higher plot ratios to transform their properties into creative lifestyle developments with hotels and residences to reshape the community in Singapore’s urban core.

Some of the older office CBD buildings up for redevelopment include the AXA Tower. The 50-storey property near the Tanjong Pagar MRT station will be redeveloped by Alibaba Group in partnership with Perennial Real Estate as the headquarters of the Chinese e-commerce giant in the city-state, the partners announced in May.

City Developments is also reportedly looking at redeveloping the nearby 38-storey Fuji Xerox Towers on Anson Road.

The PIL Building could be redeveloped for a number of new uses, according to Cushman & Wakefield’s term sheet.

Apart from building a new office property, the asset could be converted into residential apartments with commercial components on the ground floor. Subject to government approval for developing at a maximum plot ratio of 14.56 times for the 19,503 square foot site, a new condominium complex could yield 283,963 square feet of new space by gross floor area. Another option is to build a 273,042 square foot hotel at a plot ratio of 14.