Auric Pac Sells Office Building Fr $99m

Source : The Business Times, February 22, 2008

Price is 2.6 times what it paid for 16-storey building two years ago

LIPPO unit Auric Pacific has sold One Phillip Street in the Raffles Place area to UK-based New Star International Property Fund for $99.02 million or $2,736 per square foot of the 999-year leasehold building’s net lettable area (NLA).

Auric’s selling price is about 2.6 times the $37.6 million it paid for the 16-storey building about two years ago when it bought the property from Kewalram Group. Interestingly, Kewalram had bought One Phillip Street from Lippo in early 1996 for $76.8 million.

The latest sale earlier this week is believed to have been brokered by Jones Lang LaSalle.

The property, with 36,194 sq ft net lettable area, is fully leased. Tenants include Auric Pacific, First Reit and Miller Insurance Services. Completed in 1993, the building does not have immediate redevelopment potential based on current planning parameters.

The asset is New Star’s second major acquisition in Singapore. In May last year, it bought Parakou Building, at the time a newly completed freehold office block, at the corner of Robinson Road and McCallum Street for $128 million or $2,013 psf of NLA.

Since its acquisition of Parakou Building, New Star has enjoyed a 20 per cent capital appreciation of the property. The building’s occupancy has also increased from 85 per cent to 100 per cent, and its rental income risen by 31 per cent since acquisition, according to New Star Asset Management’s head of acquisitions (Asia-Pacific) Simon Tyrrell.

As for the One Phillip Street purchase, Mr Tyrrell acknowledged that the passing yield (based on current leases) is ‘quite low’ but added that New Star plans to boost returns from the building through its professional management, which includes achieving more efficient power usage, improving the leasing structure and embarking on refurbishment and upgrading works that could potentially boost the property’s NLA and income.

This is the 17th asset the fund has bought since its launch in June last year. Its properties are located in Japan, Australia, Germany and the Netherlands, in addition to Singapore. The open-ended fund has raised £pounds;650 million (S$1.8 billion) so far, of which about £pounds;270 million have been invested so far.

‘We’re an unleveraged fund, and make pure-cash acquisitions. So we’re not susceptible to sub-prime issues. We’re also a long- term investor,’ he added.

Mr Tyrrell revealed that the fund is eyeing another acquisition in Singapore to the tune of $50-100 million. ‘We’re looking across all asset classes, including office, industrial, retail and industrial/office,’ he added.

The fund is also looking at properties in Taiwan and Korea.

Auric said the net book value of One Phillip Street as at Sept 30, 2007, was $79.25 million and the sale was part of its strategy of divesting non-core investments.

Auric owns stakes in Robinson and Co (currently the subject of a takeover offer by Dubai’s Al-Futtaim Group), Food Junction Holdings and the Delifrance chain.

The sale will result in a net gain of about $13.52 million which will be recognised in Auric’s group profit and loss accounts for the current year ending Dec 2008.

Assuming that the sale had been effected at the end of the company’s financial year ended Dec 31, 2006, the net tangible assets per share would have increased by 46 cents from $1.79 to $2.25.

Assuming that the sale had been effected at the beginning of the company’s financial year ended Dec 31, 2006, the earnings per share would have decreased by 0.29 cent from 15.71 cents to 15.42 cents.