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CCT to buy Asia Square Tower 2 for S$2.09b
CAPITALAND Commercial Trust (CCT) is buying Asia Square Tower 2 from BlackRock Asia Property Fund III L.P. for an agreed property value of S$2.09 billion or S$2,689 per square foot, making it Singapore's second largest office tower sale in history.
The acquisition comprises Asia Square Tower 2 and excludes the hotel premises owned by an unrelated third party. Asia Square Tower 2 is a 46-storey integrated commercial development comprising a premium quality Grade A office building and amenities including The Westin Singapore and a two-storey retail podium.
The sale will be BlackRock's fourth property sale in Singapore since 2015. Last year, it sold its Asia Square Tower 1 in the Marina Bay district to Qatar sovereign-wealth fund Qatar Investment Authority for S$3.4 billion.
CCT will fund the purchase through a combination of a fully underwritten and renounceable rights issue to raise gross proceeds of about S$700 million, external bank borrowings of S$1.12 billion, and proceeds of about S$340.10 million from the 50 per cent stake sale of One George Street, Golden Shoe Car Park and Wilkie Edge. DBS Bank Ltd., J.P. Morgan Chase & Co. and HSBC are advising CapitaLand Commercial Trust on the rights issue.
Soo Kok Leng, Chairman of the manager, said: "The addition of Asia Square Tower 2 is a strategic move that is in line with our portfolio reconstitution strategy to rejuvenate CCT's portfolio with the addition of newer and higher yielding Grade A assets.''
One George Street and Wilkie Edge were divested at exit yields of 3.2 per cent and 3.4 per cent, respectively, and are replaced with the acquisition of this higher yielding property at an initial yield of 3.6 per cent, CCT said.
Offering about 0.7 million sq ft of net lettable area (NLA), Asia Square Tower 2 enlarges CCT's attributable office NLA to 3.5 million sq ft.
He added that with the acquisition, CCT is well anchored in all the key sub-markets in Singapore's Central Business District: Marina Bay, Raffles Place, Tanjong Pagar and City Hall; cementing its position as the largest landlord of prime office assets in Singapore.
At S$2.09 billion, the agreed property value is lower than the appraised value of S$2.11 billion, or S$2,710 per sq ft, based on an independent valuation conducted by Knight Frank Pte Ltd, using the discounted cash flow analysis and capitalisation approach.
The completion of the acquisition is expected to take place in November 2017 or a date to be agreed between CCT and BlackRock Asia Property Fund III L.P..
Jeremy Lake, Executive Director of Capital Markets at CBRE, one of the agents working on the transaction for the BlackRock-advised fund, noted the market has been eagerly awaiting the confirmation of this deal.
"It provides another pricing benchmark which reconfirms that the recovery in office rents and prices is well underway and in the last few months more and more local and overseas investors have been asking us about office investment opportunities in Singapore.
"One or two owners have been tracking this deal pending making a decision to sell their own building."