78 Shenton Way being sold to PGIM Real Estate

Singapore

US-BASED PGIM Real Estate is understood to have entered into a deal to buy 78 Shenton Way from a fund managed by Alpha Investment Partners.

The headline price for the property, which comprises two office towers, is close to S$1,900 per square foot on net lettable area (NLA) of about 362,000 sq ft, The Business Times understands. This would translate to around S$680 million for the property, which is on a site with a balance lease term of about 64 years.

However, BT understands that the deal may involve a complex structure. In addition to the headline price, PGIM Real Estate may have agreed to make a further payment to Alpha in the event that the planning authority approves, within a certain timeframe, redevelopment schemes proposed by Alpha that could result in enhancement of the site's value.

Alpha, which is part of Keppel Capital, is said to have mulled a couple of mixed-development schemes, both of which include a residential component.

One scheme is based on the 494,375 sq ft existing gross floor area (GFA), which works out to 6.9 times the site area - which already exceeds the 5.6+ plot ratio designated for the commercial-zoned site under the Urban Redevelopment Authority's Master Plan 2014. Another proposes a much-higher plot ratio than 6.9.

Securing approval for a proposed redevelopment that includes a residential component would typically boost chances of getting a top-up of the site's lease to 99 years.

78 Shenton Way is at the fringe of the Central Business District office market but could be the gateway to the proposed Greater Southern Waterfront city that will come up on some 1,000 hectares of land to be freed up when port terminals including those at Tanjong Pagar and Pasir Panjang are relocated to Tuas.

Another positive for 78 Shenton Way will be the completion in 2025 of the Prince Edward Station under Circle Line 6. One of the station's entrances will be right next to 78 Shenton Way.

This station will be part of an extension that will close the loop for the Circle Line by connecting Harbourfront and Marina Bay stations.

Alpha acquired 78 Shenton Way in two stages from Commerz Real. In 2012, it bought the initial 50 per cent of shares in the company owning the asset in a deal that valued the entire property at S$608 million. This was followed by Alpha's purchase of the remaining 50 per cent in 2016; that transaction valued the whole of 78 Shenton Way at about S$603 million.

The asset comprises two towers built at different times on a 71,651 sq ft site.

The older Tower 1 is a 34-storey granite-clad building with NLA of 284,622 sq ft, based on an earlier report. It was completed in 1988 and currently has unobstructed sea views beyond the Tanjong Pagar container terminal. The 11-storey Tower 2, completed in 2009, is a glass-clad block with 77,577 NLA sq ft. Most of this tower is leased to AIG.

The sale of 78 Shenton Way is slated for completion around the middle of this month.

Colliers International and Edmund Tie & Co are understood to have brokered the transaction.

Buyer PGIM Real Estate owns a portfolio of shopping malls and an office building here under the Asia Retail Fund, which it manages.

This portfolio includes Tiong Bahru Plaza, White Sands in Pasir Ris, Century Square in Tampines, Hougang Mall, Liang Court along River Valley Road and Tampines One as well as the Central Plaza office block in Tiong Bahru.

The group also owns some industrial properties on the island including a cold store logistics facility at 1 Buroh Lane in Jurong which it bought for S$193.8 million last year.

PGIM Real Estate is the property investment business of PGIM, the global investment management arm of New York Stock Exchange-listed Prudential Financial Inc.