EOI for half stake in CCT's One George St closed in December

Singapore

AN EXPRESSION of interest (EOI) exercise ended early last month for the sale of a half stake in CapitaLand Commercial Trust's One George Street office tower in the CBD, say sources.

It is understood that CCT and the incoming investor will each hold 50 per cent of shares in a new special purpose vehicle that will be set up to own the 23-storey tower. The building is on a site with a balance lease term of 86 years.

Market watchers said it makes sense for CCT to divest part of its interest in One George Street as it is a fairly mature asset. Moreover, the financial resources that could be freed from the sale would come in handy for CCT to help fund a potential purchase of the 60 per cent of CapitaGreen that it does not own. CapitaGreen, a Grade A office tower on the former Market Street Car Park site, was completed slightly more than a year ago.

Another point to note about CCT's strategy to retain a half stake in One George Street is that it would enable its parent CapitaLand group to continue managing the asset. While CCT's preference is to sell a half stake in One George Street, analysts said it may be prepared to divest it completely if it receives a good offer.

CCT acquired One George Street in 2008 from CapitaLand at S$1.165 billion; CapitaLand provided yield protection for a period of five years.

As at June 30, 2015, the building was valued at S$1 billion, which works out to S$2,235 per square foot based on the building's net lettable area of 447,395 sq ft.

Bidders in the recent EOI exercise are believed to have been given a guide price of S$2,400 psf to S$2,600 psf for the asset. At the lower end of this range, the net yield would be slightly below 4 per cent, based on passing rents at the time.

Prior to anchor tenant Royal Bank of Scotland's departure from the building a few months ago, One George Street's occupancy was said to be about 98 per cent. In its third quarter 2015 financial result statement, CCT had indicated the occupancy in the building was 99.4 per cent. RBS continues to pay rent to CCT until its lease expires at the end of March 2016.

The bank had occupied two levels totalling around 60,000 sq ft. Negotiations are going on with prospective tenants to take over the space, suggest leasing agents.

Cushman and Wakefield (C&W) is understood to have conducted the EOI exercise on behalf of CCT for the sale of a half stake at One George Street over November and December last year.

It is said that CCT had received unsolicited offers for the property before deciding to appoint C&W to conduct what has been described as a rushed EOI exercise. Potential bidders are said to have been screened by CCT before being approached to participate in the EOI.

Responding to a Bloomberg report on the proposed sale of the building, CapitaLand Commercial Trust Management Limited (CCTML), the manager of the trust, said in a regulatory filing with Singapore Exchange on Wednesday evening that "CCTML adopts an active portfolio management strategy to evaluate asset plans for CCT's properties from time to time, in its ordinary course of business".

"The portfolio and asset plans include acquisition and development, as well as divestment and asset enhancement of any of its assets. There is no certainty or assurance of any plans materialising," it added.