IOI Boss Buys Shenton House for $392M in Singapore’s Second-Largest Deal of 2023

A private company controlled by the vice chairman of Malaysia’s IOI Properties Group has struck a deal to make Singapore’s second largest real estate acquisition of 2023, picking up the Shenton House commercial tower in the central business district for S$538 million ($392 million), according to an announcement on Wednesday by JLL.

The acquisition by the company belonging to Lee Yeow Seng, who also serves as chief executive of the Kuala Lumpur-listed builder, sets the tycoon and his company up to develop up to 507,500 square feet (47,148 square metres) of combined commercial and residential space on the site fronting Shenton Way opposite the Singapore stock exchange and adjacent to Asia Square in the Marina Bay area.

“With over half a million square feet of gross floor area, we will develop this strategically located and very prominent site into a premier Grade A office and luxury branded service residences. This purchase demonstrates my continued confidence in Singapore’s prime office sector and residential rental market,” Lee said.

IOI has been among the most aggressive buyers of commercial sites in Marina Bay having paid the equivalent of $1.1 billion to acquire a mixed-use plot a block south of Shenton House in 2021. The company’s IOI Central Boulevard office tower, which in June won a five-floor pre-leasing commitment from Morgan Stanley, is located one block north of Lee’s new project.

Work, Live and Play

Shenton House’s 36,350 square foot site is the prime target of the acquisition, with the 1954-vintage tower set to make way for a combined commercial and residential complex which, under government incentives established in 2019 to encourage building of residential in Singapore’s urban core, would allow the developer to build 25 percent more space on the prime site than if it pursued a pure office strategy.

At the agreed compensation, and after paying an estimated land betterment charge and lease top up fee to the government to win a fresh 99-year leasehold term, Lee is paying the equivalent of S$1,885 per square foot of built area in the project, assuming that the developer pursues a mix of 60 commercial to 40 percent residential.

“Shenton House is the last remaining redevelopment opportunity at this stretch of the prime Shenton Way thoroughfare,” said Tan Hong Boon, an executive director with JLL’s capital markets division in Singapore, whose team advised on the transaction. “Given the limited supply of new Grade A offices in the core of the CBD as occupiers look to locate to low carbon modern office space, as well as the limited availability of luxury rental housing in the area, the Shenton House site will fill these gaps timely and further contribute to the rejuvenation of Shenton Way.”

Market Slows

Lee is acquiring the strata-title tower through the ownership group’s third attempt at a collective sale of the aging building after an initial attempt in February of this year at a reserve price of S$590 million had failed to receive a bid by the April deadline.

The lead owners then launched a second attempt in June at the reduced price of S$538 million, but failed to persuade enough owners to sell at the reduced price.

At the agreed compensation, Shenton House still ranks as Singapore’s second-biggest ticket for a single property asset in the city-state this year, according to Mingtiandi statistics, ranking behind only the S$908 million collective sale of the Far East Shopping Centre on Orchard Road to Chinese billionaire Du Shuanghua’s Bright Ruby one month ago.

In July, a holding company linked to Singapore’s Worldwide Hotels Group acquired the ParkRoyal on Kitchener Hotel from Pan Pacific Hotels Group for S$525 million.

“This bid recognises the attractiveness of Singapore’s office sector and residential rental market underpinned by Singapore’s exceptional fundamentals as Asia’s financial and business centre,” JLL’s Tan said.

Investment in Singapore real estate, including land sales, is predicted to drop to no more than S$21 billion this year from S$24.7 billion in 2022, according to a recent report from Savills. That slowdown in property trades comes despite prime office rents in the central business district around Raffles Place and Marina Bay having risen 5.1 percent in the first three quarters of 2023, according to a separate study by Knight Frank.

Growth in office rents slowed to 0.8 percent in the third quarter, with rising interest rates and growing geopolitical uncertainty further deterring trades.