Chevron House Sold For Record $2,780 Per Sq Ft

Source : The Straits Times, Fri, Aug 31, 2007

OFFICE prices in Singapore have reached a new record high with the sale of Chevron House in Raffles Place.

The 33-storey building fetched $730 million, or $2,780 per sq ft (psf) of net lettable area, developer CapitaLand said in a statement yesterday. The buyer is believed to be a foreign fund.

CapitaLand has a 50 per cent stake in the property. The rest is held by NTUC Income Insurance Co-operative and IP Property Fund Asia, which is managed by CapitaLand and ING Real Estate.

The price of Chevron House eclipses the last known record set for the sale of an office building - 1 Finlayson Green - which the Hong Leong Group sold in June for about $230 million, or $2,650 psf.

Another record, however, is already in the works.

Sources say that Hitachi Tower in Collyer Quay, also partly owned by CapitaLand, has received bids of $3,200 psf to $3,400 psf, and an official sale announcement is expected soon.

Chevron House's sale comes just a few days after CapitaLand paid $590.3 million for the remaining 50 per cent stake in Eureka Office Fund, which owns One George Street. This valued the development at $1.2 billion, or about $2,700 psf.

Property watchers said Chevron House's price is particularly stunning because it is on a 99-year lease that started in 1989, while 1 Finlayson Green is a freehold property.

Mr Donald Han, managing director of property consultancy Cushman & Wakefield, said, however, that the price for Chevron House 'seems fairly in line with market rents'.

Asking rentals for top-grade offices in Raffles Place are hovering at $15 psf to $18 psf per month, he said. This puts current yields for such offices at 'anything from 2.8 per cent to 3.5 per cent'.

Market sources said that based on Chevron House's sale price, the yield is about 3 per cent. Mr Han puts the yield of 1 Finlayson Green at about 2 per cent and that of One George Street at between 2.5 per cent and 2.8 per cent.

Prices and rentals of Singapore's offices have been soaring in recent months, due to a shortage in quality buildings and growing demand from occupiers and investors alike.

Indeed, The Straits Times understands that about half a dozen parties expressed interest in Chevron House via a private tender, and it was a close contest between the top two or three bids.

CapitaLand said it will book a gain of about $150.8 million from the sale of its stake in the building.

The developer bought Chevron House - then known as Caltex House - from tycoon Ong Beng Seng in 1999, along with Hitachi Tower which is behind it. CapitaLand paid just under $670 million for the two buildings.