Singapore Power Building Sold For $1b

Source : The Business Times, January 17, 2008

Buyer said to be Pacific Star-linked fund; group also eyeing DBS Building

A property fund managed by Singapore's Pacific Star group, with monies invested by German and other European investors amongst others, is believed to have bought Singapore Power Building at Somerset Road.

The building, on Somerset Road, has scope for asset enhancement by creating ground level retail space.

The price is said to be in the region of $1 billion or around $1,820 per square foot of net lettable area.

The 17-storey building, once known as PUB Building, is on a site with a remaining lease of about 66 years. It has a total net lettable area of about 550,000 sq ft.

Although it does not have immediate redevelopment potential - as its current gross floor area surpasses the maximum allowed under the 2003 Master Plan - the 30-year-old property's new owners can look at rental upside as leases roll over. BT understands that there may also be some scope for asset enhancement works, perhaps by adding retail space at the ground level.

The property is being sold by Singapore Power and the Public Utilities Board. PUB moved out last year, while SingPower currently occupies about 200,000 sq ft, which it is likely to lease back at market rent for a few years, market watchers reckon.

SingPower Building was sold through an expression-of-interest exercise which closed in the fourth quarter of last year.

Pacific Star, started by former real estate investment banker Jeff Tay, is also said to be eyeing DBS Building Towers 1 and 2 at Shenton Way, which is being divested by Goldman Sachs. Market watchers suggest the potential buyer may take the form of a consortium involving Pacific Star-linked entities and possibly some of the group's past and present partners.

The Pacific Star group also spearheaded the $505 million securitisation of Capital Square near Raffles Place in 2002 in a deal that valued the prime office development at about $1,200 psf of strata area.

The market has been abuzz with office deals. A Goldman Sachs-linked fund recently bought the 999-year leasehold Hitachi Tower at Collyer Quay for $811 million or about $2,900 psf of net lettable area. Last year, Goldman Sachs also bought Chevron House for $2,780 psf. Formerly known as Caltex House, Chevron House had a remaining 81-year lease at the time of the deal in August 2007.

This week, the Singapore Land Authority launched an expression-of- interest exercise for The Atrium @ Orchard. CB Richard Ellis, the marketing agent, has indicated a price of above $2,700 psf for the property, which will be sold with a fresh 99-year lease.

Prime Grade A office rents in Singapore doubled last year because of the office space crunch. Investment interest in this sector remains strong, given that the supply shortage is expected to continue for the next couple of years.

Some occupiers are even leasing entire small- to mid-sized office developments to get a firmer handle on their occupation costs in the next few years. Among such buildings being eyed by single occupiers is 67 High Street, which will be completed by the end of this year or early next year.

The nine-storey building, which will have about 78,000 sq ft in net lettable area, is being developed on the former Satnam House site by an entity linked to the Royal Brothers group. The property is being marketed by Jones Lang LaSalle.