DWS, Hines poised to buy ramp-up industrial building for S$93.8m

Singapore

GERMAN asset management company DWS Group and Houston-based privately-owned global property investment firm Hines are understood to be teaming up to buy a 9-storey ramp-up light industrial building in Bukit Batok for S$93.8 million.

Known as Bukit Batok Connection, the property is being sold by the Soilbuild Business Space Reit, which was privatised last year by a tie-up between Blackstone and Soilbuild Group Holdings co-founder Lim Chap Huat.

Following its delisting from the Singapore Exchange in April 2021, Soilbuild Business Space Reit became a private trust.

The trust and an entity believed to be owned by DWS and Hines entered into a put-and-call option deal last month for the property at 2 Bukit Batok Street 23.

CBRE is understood to be brokering the transaction; it could not be reached for comment.

The price works out to about S$248 per square foot on the net lettable area of 377,776 sq ft. The property is on a 161,578 sq ft site with a balance leasehold tenure of almost 21 years.

Soilbuild Group clinched the 30-year leasehold industrial plot at a Government Land Sales (GLS) tender in 2012 conducted by the Urban Redevelopment Authority. Soilbuild outbid 3 other contenders, bagging the plot at S$32.328 million or S$80.03 per square foot per plot ratio (psf ppr).

The site is zoned for Business 1 use with 2.5 plot ratio (ratio of maximum gross floor area to site area).

Soilbuild developed the property and in 2016 sold it for S$96.3 million to its sponsored Reit. The Soilbuild subsidiary that sold the asset, SB (Westview) Investment, entered into a 7-year master lease arrangement for the asset, paying a rent of S$8 million to the Reit in the first year with a rental escalation of up to 2 per cent a year.

Based on information in Soilbuild Business Space Reit's June 2016 announcement of the acquisition of Bukit Batok Connection, the property received Temporary Occupation Permit in May 2015. Unit sizes in the development range from 2,000 sq ft to 8,000 sq ft. Each unit has exclusive parking lots for direct loading and unloading.

In addition, the ramp-up factory allows 20-footer container access to all levels - facilitating daily operations of occupiers. The property has 306 car lots and 190 lorry lots.

Bukit Batok Connection had an updated carrying value of S$83.9 million as at Nov 30, 2020, based on Soildbuild Business Space Reit's announcement on Dec 14, 2020 relating to the buyout and privatisation offer by Blackstone and Lim.

Cushman & Wakefield's executive director of logistics and industrial for Singapore, Brenda Ong, said a sale of Bukit Batok Connection would reflect the privatised Soilbuild Business Space Reit reorganising its Singapore portfolio, prioritising the business park and high-tech industrial segments, while divesting small, older properties and those with shorter balance land lease.

"That said, a ramp-up industrial building is attractive - especially to SME occupiers as vehicles can drive right up to their doorstep in a multi-storey facility, instead of tenants having to use conventional vertical transport via cargo lifts.

"The intending buyers would be eyeing higher rents in the building amid current tight supply of industrial space," she noted.

Market watchers expect the privatised Soilbuild Business Space Reit to continue selling more non-core assets. However, the trust is also redeveloping its property at 2 Pioneer Sector 1 into a modern ramp-up warehouse suitable for use as a logistics facility.

DWS was formerly known as Deutsche Asset Management. It used to operate as part of Deutsche Bank until 2018 when it became a separate entity through an initial public offering on the Frankfurt Stock Exchange. The bank remains its biggest shareholder.

DWS already owns properties in Singapore, including logistics assets.

For Hines, founded in 1957 by Gerald Hines, this will be its first Singapore property investment, say observers.

Last year, it was understood to be in the running for Twenty Anson, an office asset near Tanjong Pagar MRT station.

Hines' Singapore country head Lim Kian Fong, appointed to the post less than a year ago, was formerly from DWS, where he was director of portfolio management and head of transactions in Southeast Asia.

Singapore industrial properties have been in high demand, with a total of S$4.4 billion in big-ticket transactions (of at least S$10 million each) last year, double the S$2.1 billion in 2020, based on C&W Research's analysis. The 2021 figure, however, is below the S$5.9 billion in 2019.

Ong of C&W notes that investors remain hungry for industrial assets - especially logistics facilities, business parks and high-tech industrial buildings. However, there is a scarcity of such assets available for sale here.

An additional hurdle with transacting industrial properties that are on sites with leases issued by JTC is the agency's restrictions.

"On a brighter note, industrial properties developed on GLS sites are not encumbered by such restrictions," she added.

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