CapitaLand, CCT and Mitsubishi Team Up for $1.3B Singapore Tower

Property giant CapitaLand is teaming up with a Japanese partner and its own REIT affiliate to build a new S$1.82 billion ($1.32 billion) mixed-use project in Singapore’s downtown financial district, amid a flurry of office investment deals in the island nation.

The developer and Mitsubishi Estate have entered into a joint venture with CapitaLand Commercial Trust to build a 51-storey skyscraper on the site of the Golden Shoe Car Park at Raffles Place, a property already held by the Singapore-listed trust.

Upon its targetted completion in the first half of 2021, the 280-metre-tall skyscraper will add over one million square feet (93,000 square metres) of space to Singapore’s financial district.

CapitaLand Adds to the CBD Skyline

Under the terms of the agreement signed by the three parties, the joint venture will purchase Golden Shoe Car Park from CCT for S$161.1 million. The new entity will also be paying another S$957.8 million for permission to convert the site for commercial development use, along with other land related costs, according to a statement issued by the three companies.

The 10-storey car park, which has 64 years remaining on its land lease, is located at 50 Market Street in the core of Singapore’s downtown banking district. Served by the Raffles Place metro station, the area is already home to the country’s three tallest buildings.

Grade A office space will account for 80 percent of the development, and a 299-room serviced residence operated under CapitaLand’s Ascott business will take up another 14 percent. The proposed building will also include retail amenities, a food centre, and a four-storey “green oasis” with a botanical walkway and outdoor terrace.

According to a statement by CCT, the partners to the deal will set up two trusts, Glory Office Trust and Glory SR Trust, to handle the commercial and residential portions of the development, respectively. CapitaLand and CCT will each hold a 45 percent stake in the venture, with Mitsubishi taking the remaining ten percent. CCT has a call option to buy the other partners’ interests in the joint venture within five years after the building is completed.

“We are keen to replicate the overwhelming success and value created from redeveloping the former Market Street Car Park into CapitaGreen in 2014,” said Lynette Leong, CEO of the trust’s manager.

“The redevelopment is also in line with our portfolio reconstitution strategy for CCT where we maximise the land use intensification of GSCP and consequently enhance its value. The redevelopment is expected to generate a yield-on-cost of about 5.0% per annum on a stabilised basis,” Leong added.

CCT pointed out that the project is slated for completion at a time when 600,000 square feet of annual new office supply is expected to launch in the central area of Singapore, down from two million square feet in 2017. The developers aim to begin construction in the first quarter of next year.

Singapore’s Downtown Starts to Heat Up

Singapore’s office investment market is heating up with a string of major transactions in the downtown financial district. This past May, CCT sold its stake in One George Street, a 23-storey office building at Raffles Place for S$591.6 million ($424 million), to a unit of Richard Li’s FWD Group.

In February, Nanjing-based developer Fullshare Holdings agreed to buy the GSH Plaza office building in Raffles Place for S$725.2 million ($512 million). DBS Group in the same month sold the PwC Building, just a block away, to Canadian insurer Manulife for S$747 million ($525.7 million).

More recently, Hongkong Land announced last month it was partnering with a leading Malaysian developer to build and manage a pair of office towers within the Marina Bay Financial Centre less than one kilometre down the street, paying S$940 million ($682 million) for its stake in the project.

In another area of downtown Singapore, CCT earlier this month sold the mixed-use Wilkie Edge development for S$280 million ($202.7 million), representing a 53.3 percent markup over the 2008 purchase price.

CapitaLand Turns to Mitsubishi Again

The deal strengthens CapitaLand’s partnership with Mitsubishi Estate Asia, which has seen the two firms work together on a series of residential, office and retail projects across Singapore, Japan, China and Vietnam over the past decade.

In 2011, CapitaLand, CCT and Mitsubishi Estate teamed up to tear down the Market Street Car Park near Raffles Place and develop the 40-storey CapitaGreen super-sustainable office tower. In May, CapitaLand Commercial Trust agreed to buy out the combined 60 percent stake owned by its two partners in that project for S$393 million.