ARA Asset said to bid for Singapore's Capital Square tower stake

[SINGAPORE] ARA Asset Management Ltd is bidding for a stake in Singapore's Capital Square office tower in the city's central business district, according to people familiar with the matter.

Singapore-listed ARA is seeking the 50 per cent stake in the building that was put up for sale last year by Alpha Investment Partners, the investment arm of Keppel Land Ltd, said the people, who asked not to be identified because the process is private.

The 16-story prime office building in the Raffles Place financial district, whose tenants include Morgan Stanley and Citigroup Inc, was bought by Alpha and insurer NTUC Income in 2011 from Munich Re for S$889 million, or about S$2,300 per square foot.

The transaction will add to a recent spate of deals in Singapore's business district as falling rents and a large supply of prime space have pushed valuations lower.

Donald Han, a Singapore-based managing director at real estate broker Chestertons, estimates that the Capital Square tower could fetch about S$2,500 per square foot, valuing the 50 per cent stake at roughly S$415 million.

"Rents have dropped to compelling levels so we are seeing an increase in deal activity," Mr Han said.

"Since its half the stake for Capital Square, the buyer won't get full control and hence the sale cannot get premium pricing."

ARA declined to comment in an e-mailed statement, while representatives for Keppel didn't immediately respond to messages seeking comment.

Qatar Investment Authority, the sovereign wealth fund of the Middle Eastern country, agreed this month to buy BlackRock Inc's Asia Square Tower 1 for S$3.4 billion in the biggest office transaction in Singapore. That's lower than the S$4 billion price that BlackRock had anticipated last year.

CapitaLand Commercial Trust, Singapore's largest office real estate investment trust by value, agreed to buy the remaining 60 per cent stake in CapitaGreen in the CBD for S$393 million from its partners last month.

MYP Ltd, which operates an investment holding company for properties and provides warehousing and logistics services, offered S$560 million for the Straits Trading Building, a Grade A office tower also in the business district, the company said.

Capital Square, which is spread out over 388,215 square feet, was built by developer Keppel Land and completed in 1998.

CBRE Group Inc and Jones Lang LaSalle were appointed to market Capital Square, they said in a joint statement in April 2015.

BLOOMBERG