Source : The Business Times, December 14, 2007
UK-BASED New Star International Property Fund has received three offers to buy the Parakou Building in Robinson Road for 20 per cent more than the $128 million it paid in May.
But it has decided that the rental returns are just fine - fornow.
'We are in Singapore for the long term,' said New Star Property Asset Management's head of global property Stuart Webster.
The potential buyers of the Parakou Building included two international funds and a private investor, hesaid.
Mr Webster was in Singapore yesterday to look at more acquisitions here. He did not give details but said one building in particular is worth about $120 million and he expects to close the deal early next year.
New Star was launchedsix months ago and has since raised US$1.1 billion, about half of which has been invested in property.
New Star has 13 properties - seven are in Japan, two in Australia, two in Germany, one in the Netherlands and one in Singapore.
Whileits seven properties in Japan account for 22.2 per cent of asset allocation, its single Singapore property accounts for 11.6 per cent.
Its portfolio may double by next year, with a longer-term target of around US$5 billion.
About 70 percent of assets will be in Asia. But the fund is not looking at property in China or India because these markets do not fit its risk profile.
It is not looking for trophy assets either, he said. 'I would rather have 10 small buildings rather thanone large one,' said Mr Webster. 'We are not looking for prestige but for quality investment.'
New Star is yielding about 4 per cent and is unique insofar as it is a non-leveraged fund with daily liquidity.
Up to 80 per cent of its assetswill be invested directly in property and with the other 20 per cent in property securities and cash.
Although one could argue that real estate investment trusts (Reits) offer investors exposure to real estate too, Mr Webster reckons Reits pickup the volatility of equities.
There is volatility in the property sector, but he believes the outlook for the office sector here is good.
Rents have hit $8 per sq ft per month at Parakou Building which is enjoying spillover demand forGrade A space in Raffles Place.
Mr Webster does not expect demand to weaken either, even after new supply comes on stream after 2010.
Based on his reading of the Singapore economy, he said: 'Singapore will need that supply.'
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