Straits Times 15 Jul 2014:
OFFICE deals were the main driver of property investment sales in the second quarter and will likely stay at the forefront in coming months, consultants said. They noted that a resurgence in rents has led to keener interest from investors in the office sector. Buyers were mainly Singapore-based property firms and real estate investment trusts (Reits), although some from other parts of Asia such as China and Japan are also on the lookout, they added.
The total volume of real estate investment sales was around $4.4 billion in April through June, consultancy DTZ noted yesterday. DTZ did not provide the transaction volume for office sector deals but a CBRE report last week put the figure at around $1.8 billion in the second quarter. Investment sales refer to transactions worth $5 million or more but they exclude about $553 million worth of sales of single residential units and sites that cannot be redeveloped or subdivided into more than one plot.
The level of investment sales in the second quarter was 11 per cent lower than in the preceding three months, DTZ said. But it noted that there were more big deals worth between $500 million and $1 billion in the second quarter than in the first, including the sale of Equity Plaza, the sale of a 92.8 per cent stake in Prudential Tower, as well as two state land tenders, one in Woodlands and one in Sims Drive.
Keppel Land and its fund management arm Alpha Investment Partners sold Equity Plaza for $550 million last month to Plaza Ventures, a consortium led by Mr Sam Goi’s GSH Corp. Keppel Reit also agreed to sell its 92.8 per cent stake in Prudential Tower for $512 million in May, to a consortium made up of Lian Beng Group, KOP Limited, KSH Holdings and Centurion Global.
Property companies were the largest buyers of real estate in the second quarter, accounting for $3.1 billion or about 71 per cent of investment activity, DTZ said. It added that though Reits sold more properties than they bought in April through June, that was likely to reverse this quarter due to the listing of Frasers Hospitality Trust.
The trust’s initial portfolio will consist of six hotels and six serviced residences. These include InterContinental Singapore and Fraser Suites Singapore, which the trust will buy for $824.1 million in total. “Reit activity and developer acquisitions will continue to support investment activity going forward,” said Ms Swee Shou Fern, director of investment advisory services at DTZ. However, consultants differed on the outlook for the investment sales market. “As global real estate markets start to improve, investors and funds are becoming more positive about the performance of the real estate market.
This could see them increasing their allocations to real estate and Singapore could benefit, being one of the most liquid markets in the region,” Ms Swee said. CBRE Singapore research head Desmond Sim also said in a report last week that “investment activity is likely to be nudged ahead by the office sector with investments in completed strata office properties as well as some en-bloc office buildings”. However, he expects the investment market to slow down due to “overall cautious sentiment” due to property curbs and the reduction in state land parcels up for tender in the next six months.