Hines-DWS JV Buys Singapore Industrial Asset From Blackstone, Soilbuild for $69M

US developer and investment firm Hines has made its first acquisition in the Singapore market, teaming up with German fund manager DWS Group to buy a ramp-up workshop in the Bukit Batok area from a Blackstone-controlled trust for S$93.8 million ($69 million).

Market sources familiar with the matter confirmed DWS and Hines agreed last month to purchase Bukit Batok Connection, a 9-storey light industrial asset from the portfolio of Soilbuild Business Space REIT, an industrial trust which Blackstone and Soilbuild chairman Lim Chap Huat privatised in a S$700 million buyout in April of last year.

The ramp up building at 2 Bukit Batok Street 23 is nestled within a mature residential neighbourhood which according to CBRE head of industrial and logistics for Singapore and Southeast Asia Rimon Ambarchi, who brokered the deal, is an attractive location for last mile logistics as e-commerce providers continue to boost their operations in Southeast Asia’s wealthiest city.

Singapore’s e-commerce market, which is predicted to produce average revenue per user of $2,039 this year, is set to grow by a compound average rate of 16.4 percent from now through 2025, according to figures from Statista. That expansion has driven more than five straight quarters of increases in industrial rents according to data from Singapore’s Jurong Town Corporation.

Selling Off REIT Asset

Located in the western part of the city-state, Hines and DWS’ new acquisition spans 404,000 square feet (37,532 square metres) of gross floor area (GFA) on a 161,577 square feet (15,011 square metres) corner plot with 21-years remaining on the leasehold term.

“Bukit Batok Connection offers ramp-up space with flexible modular design that is well suited for the needs of today’s industrialists and this has helped support the high tenant retention level and close to full occupancy rate,” Ambarchi said. He added that Singapore’s “tight supply situation” for industrial space is likely to boost returns for the new owners.

The latest JTC data showed 90.1 percent of Singapore’s 50.72 million square metre total industrial space was occupied in the third quarter of last year, leaving just 5 million square metres of available stock to date while rents continued to inch up by 0.7 percent on a quarterly basis. The trend was mostly driven by traditional distribution demand, e-commerce and online grocery shopping according to an October commentary from Edmund Tie.

The Bukit Batok transaction, which was first reported by the Business Times, is expected to be completed towards the end of this month according to market sources. Representatives from both Hines and DWS declined to comment on the deal.

Changing hands at a price of S$232.2 per square foot of built area, the total price is 12 percent higher than the property’s S$83.9 million valuation at the end of 2020, but is still 6 percent less than the S$100 million that Soilbuild REIT paid to acquire the property in 2016 from a unit of its sponsor, Soilbuild Group. The local developer had first acquired the 30-year leasehold plot via a public tender in 2012 for S$32.33 million, with approval to develop up to  a plot ratio of 2.5.

The new owners, Hines and DWS, are understood to be expecting higher rents from the asset, given the limited industrial space supply in the city-state.

Strong on Singapore Industrial

This initial Singapore purchase for Hines, which manages $83.6 billion in assets globally, comes eight months after the firm launched its core open-ended flagship fund Hines Asia Property Partners in May 2021, with Singapore cited as one of its target markets at the time.

The private Houston-based builder has been busy beefing up its industrial portfolio in other parts of Asia where it is developing two logistics centres in Greater Seoul: the 1 million square foot Iljuk Logistic Center south of Seoul announced over the weekend, and the Namyang Logistics Center in Hwaseong which it kicked off in May of last year.

The Bukit Batok deal comes just over a half year after Hines boosted its on the ground presence in Singapore by hiring Kian Fong Lim, who was previously from DWS, to head its Southeast Asia operations.

For Lim’s former co-workers at DWS, which was formerly known as Deutsche Asset Management, the asset will add to its growing Singapore portfolio which includes a 403,000 square foot warehouse bought in May last year for at least S$75 million. The property lies at 11 Sunview Way in Jurong, which is less than a 20 minute drive from the new Bukit Batok facility of DWS.

Sheds Set for Growth

Investments in Singapore’s industrial space have been pouring in and will continue to flow steadily this year given the city’s “fundamentally strong” manufacturing and logistics sectors and the potential for rents to continue rising, said CBRE’s Ambarchi.

“Structural trends such as growing e-commerce and building resilience in food and logistics supply chains have accelerated and investors will look to increase allocations to capitalise on these future-proof sectors,” he added.

In a research note published on Monday, Knight Frank shared a similar view, predicting “stable” growth for the industrial sector with rent and asset price increases to range from three to five percent for the entire year, with the 21.1 million square feet of fresh space expected to enter the industrial market this year comprising 40 percent of the new supply expected through 2025.

“Knight Frank envisages growth in the industrial sector to continue in 2022, with investment activity likely to be driven by end-users looking for manufacturing facilities for their own use as well as Grade A warehouses that boast high-quality specifications which facilitate growing supply chain demand,” the company said.