'Goldman Fund Buying Chevron House'

Source : The Business Times, Thu, September 6, 2007

Acquisition would be second major Singapore office deal for group

(SINGAPORE) A Goldman Sachs-linked fund is believed to be the buyer of Chevron House (formerly Caltex House) whose sale by CapitaLand and its partners was announced last week. The deal values the leasehold Raffles Place office block at $730 million or a record $2,780 per square foot (psf) of net lettable area. CapitaLand last week declined to identify the buyer.

Market watchers noted that Chevron House will be Goldman Sachs' second major acquisition of an office property in Singapore. A Goldman Sachs real estate fund bought DBS Towers 1 and 2 on Shenton Way in November 2005 for $690 million, or around $800 psf of net lettable area.

'They could reap a nice profit if they decide to sell DBS Towers 1 and 2 today, given that they bought the asset during the early days of the office market upcycle,' an industry observer noted.

Industry watchers said that capital values of offices in Singapore today are around two-and-a-half times what they were in the final quarter of 2005 so based on that, DBS Towers 1 and 2 should be able to command around $2,000 psf or possibly even more, given the shortage of offices.

This is despite the leasehold tenure of the property. The older 49-storey Tower 1 was completed in 1974, while the 34-storey Tower 2 was completed 13 years ago. The property has parking for about 400 cars.

Goldman Sachs bought the property from DBS, which leased back the office space it then occupied in the two towers for an initial eight-year term, with an option to renew the lease for two three-year periods, according to an earlier news report.

As for Chevron House, the change of ownership is taking place through shares in Savu Properties Ltd. Basically, CapitaLand, IP Property Fund Asia and NTUC Income Insurance Co-operative are selling their respective stakes - of 50 per cent, 25 per cent and 25 per cent - in Savu, which owns Chevron House, which stands on a site with a remaining lease of about 81 years.

CapitaLand said in its release last week that the completion date for the deal is Sept 24, and that upon completion, it will recognise in its group consolidated accounts a gain of about $150.8 million.

CapitaLand also owns a 50 per cent stake in neighbouring Hitachi Tower, where an exclusivity period has been granted to a potential buyer to conduct due diligence after discussions with the previous top bidder hit some snags, BT understands.

If the latest negotiations for the 999-year leasehold Hitachi Tower succeed, a new benchmark price is expected to be achieved for a Singapore office block.