With big ticket office deals becoming an endangered species in the real estate kingdom, PGIM Real Estate has decided to sell off a building in Singapore’s central business district floor by floor, taking advantage of record pricing for smaller scale commercial properties in the city.
After buying 108 Robinson Road for the equivalent of S$2,608 per square foot in 2021, the fund manager could achieve pricing of S$3,800 to S$4,000 per square foot or more selling the 12-storey office block on a strata title basis, according to industry sources who spoke with Mingtiandi.
“108 Robinson Road provides a unique opportunity for investors and owner-occupiers to acquire a newly refurbished, freehold office property in a prime CBD location, at an attractive investment quantum,” David Fassbender, managing director and senior portfolio manager for Asia value-add strategies at PGIM Real Estate, told Mingtiandi. News of the marketing effort was first reported by the Business Times.
The sales campaign, which is set to commence in the coming weeks, was revealed just a half-year after Singapore-based real estate private equity firm TE Capital and LaSalle Investment Management sold the last of the 15 strata-titled floors in their Solitaire on Cecil one block away from 108 Robinson Road, having achieved record prices of up to S$4,325 per square foot while selling out the project in just a few months.
Strata Stacks Up
Formerly known as the Finexis Building, the 53,873 square foot (5,005 square metre) property is within walking distance of the Telok Ayer, Downtown and Shenton Way MRT stations and the SGX Centre, which houses the Singapore Exchange.
“Potential buyers could leverage on the mid- to long-term office rental upsides and further capital appreciation in Singapore,” Fassbender said. “Furthermore, the freehold tenure of the building will have strong appeal to discerning private wealth and family offices keen on long-term wealth preservation.”
108 Robinson Road’s office floors are currently 30 percent leased and some of the higher levels have been reserved, according to PGIM Real Estate. The company is also in discussions with tenants for the first and second levels, with the first floor having 1,000 square feet of F&B space and the second storey another 5,300 square feet of retail and office space.
Following its 2021 acquisition of the property, PGIM undertook an asset enhancement programme which included upgrading the facade, installing rooftop photovoltaic panels and overhauling its mechanical and electrical systems. Following completion of the upgrades in June, 108 Robinson Road achieved Platinum certification under Singapore’s Green Mark regimen for sustainable buildings.
PGIM, which declined to disclose pricing expectations for the assets, expects the offering to attract interest from owner-occupiers, with market sources indicating that the company will be making floors available in tranches in the coming months.
With $8.1 billion in Asia Pacific assets and $208 billion globally as of September, PGIM purchased 108 Robinson Road less than three years ago from local private equity firm Sin Capital Group for $107 million in what the company described at the time as “an opportunistic acquisition that offers numerous asset enhancement and exit strategies”.
Playing Small Ball
The strata sale strategy for 108 Robinson Road comes as bite-sized Singapore office assets have continued to command top prices.
In August an investment company which controls one of Asia’s largest family-owned shipping firms purchased an office floor in the Nomu Building near Singapore’s Orchard Road for S$24 million ($17.7 million), or roughly S$3,790 per square foot.
During January of last year an investor paid S$3,000 per square foot for a set of office units in the Southpoint building at 200 Cantonment Road in Tanjong Pagar, setting a price record for the building.
Earlier this month a private company owned by the family behind Indonesian conglomerate Sinar Mas Group began marketing a floor in 15 Scotts Road in the Orchard area for S$3,419 per square foot.
Xian Yang Wong, head of research for Singapore at Cushman & Wakefield, attributes the enduring demand for strata office assets in the city-state to supply constraints and long-term prospects for higher rents in core commercial districts. The consultancy forecasts Grade A office rents in prime areas to grow 1 to 2 percent in 2024 after increasing 3 percent year-on-year in 2023.
“With limited future supply and increasing rarity, centrally located strata office prices are expected to grow over the long term,” Wong told Mingtiandi. “This is in tandem with the growth of CBD Grade A office rents which are projected to see long-term growth given tight CBD Grade A office vacancy rates and limited new office supply in the CBD over the medium term.”
Strata office supply in Singapore is expected to remain tight after the Urban Redevelopment Authority in March last year began restricting strata subdivision of commercial properties in Singapore’s urban core.