Formerly known as Singapore Airlines (SIA) building, the 35-storey office tower has been selected by CLSA Capital Partners to do exclusive diligence for purchase. The pricing is above S$530m or S$1800 psf based on net lettable area (NLA) of nearly 293,270 sqft. The maximum development potential has been tapped. The zoning of the site is commercial use with a balance lease tenure of 76.5 years.
SINGAPORE sovereign wealth fund GIC has confirmed news that its affiliates will buy US industrial property company IndCor Properties Inc from Blackstone Group LP for US$8.1 billion, making it yet another major real-estate investment for the fund.
A GIC spokesman confirmed the purchase on Tuesday, following Blackstone’s announcement of the deal.
The move gives GIC and its affiliates a significant presence in the US warehousing space, thanks to Chicago-based IndCor’s ownership of some 117 million square feet of industrial real estate throughout the country.
The deal also puts paid to IndCor’s plans for an initial public offering. Blackstone had been intending to exit IndCor through a share offering that would have valued IndCor at about US$8 billion, but clearly found the sale to GIC – a more immediate realisation of its investment – the more attractive alternative.
The investment by GIC and its affiliates comes at a time when demand for commercial real estate, and prices for such real estate, in major markets is rising. Warehouse properties and logistics-services companies are fetching increased interest from funds as global trade grows. Brookfield Property Partners LP and TPG Capital have been on the acquisition path for such assets too.
Blackstone formed IndCor in 2010, acquiring property when values crashed after the global financial crisis. IndCor now has the largest portfolio of wholly owned warehouses and distribution centres in the US, operating in 29 key markets in 23 states.
“We built IndCor through 18 acquisitions to be one of the largest industrial real estate companies in the United States,” said IndCor CEO Tim Beaudin in Blackstone’s statement. “We are excited about the company’s future prospects under new long-term ownership with GIC.”
GIC declined to comment further on the deal, which is expected to close in the first quarter of next year.
The sovereign wealth fund has been very active recently in beefing up its global real-estate portfolio, which accounted for 7 per cent of its assets in its most recent annual report.
Just last month, it announced two investments in New Zealand. In the first, it partnered with the country’s Goodman Property Trust to co-invest in Auckland’s Viaduct Quarter; and, in the second, it agreed to buy a 49 per cent stake in five malls in the country from Scentre Group in a transaction valued at NZ$1.04 billion (S$1.07 billion).
In October, it announced that it bought the entire office component of Pacific Century Place Marunouchi – situated next to Tokyo Station – with a gross floor area of 38,840 sqm of net lettable area, for US$1.7 billion. It also acquired the remaining half of the RomaEst Shopping Centre in Italy, to gain full ownership of the mall, for an undisclosed amount; and it agreed to pay more than 200 million euros (S$325 million) for a 30 per cent stake in Spanish real estate firm Gmp.
The month before, it agreed with Indian developer Brigade Enterprises to jointly invest 15 billion rupees (S$317 million) in residential real estate projects in south India.
In January, it teamed up with New York-based developer Related Cos and the Abu Dhabi Investment Authority to buy Time Warner Inc’s headquarters in Manhattan for US$1.3 billion. And, the month before that, it acquired Blackstone’s 50 per cent stake in London’s Broadgate office complex for a reported £1.7 billion (S$3.5 billion).
Meanwhile, Blackstone has been stepping up its real-estate sales, as it prepares to raise its next global property fund. The private-equity giant has been reducing its stakes in its publicly listed entities, Brixmor Property Group Inc – the second-largest US shopping centre landlord – hotel group Hilton Worldwide Holdings Inc, and lodging company Extended Stay America Inc.
Blackstone has said it plans to raise at least as much as US$13.3 billion – the amount raised in its last fund – for its next fund.
CITY Developments Ltd (CDL) executive chairman Kwek Leng Beng has warned that the current subdued state of the Singapore housing market particularly in the high-end segment, if it continues, could ignite fire sales.
Mr Kwek made this point in CDL’s third quarter results statement. CDL posted net earnings of S$127.21 million for the third quarter ended Sept 30, 2014, up 4.7 per cent from the same year-ago period. Revenue rose 58.3 per cent to S$1.32 billion.
“The domestic residential real estate market will need to battle headwinds as sentiments remain subdued with little signs of property curbs being tweaked or removed in the near-term. Transaction volumes and prices continue to face downward pressures as homebuyers maintain a wait-and-see approach,” he lamented.
The high end market, in particular, remains subdued with prices still below their 2008 peak. “Average residential rents across all market segments, particularly the high-end . . . are on the decline, coupled with a weak secondary market.
“From the group’s experience, having gone through many property cycles, if this trend continues, with prices dipping more, some mortgage borrowers affected by lower rentals may have difficulty servicing their loans, possibly leading to forced fire sales,” Mr Kwek said.
On a more positive note, Mr Kwek noted that savvy investors who believe in Singapore’s prospects will continue to read positively into the property market with a medium to long-term perspective. “New launches that are priced carefully will continue to sell, as buyers only need to make progressive payments based on stages of construction, and they are confident that the market will recover over time,” he added.
The group can also count on two “shining stars” – the office and hotel markets. “Office and hotel properties have become most desirable assets. Demand for Grade A office space in Singapore is improving; and capital value for hotels has increased significantly, even though earnings have not caught up yet. With over 120 hotels globally, the group is able to counterbalance by geographical spread,” Mr Kwek said.
In the first nine months of this year, CDL’s net earnings shrank 17.1 per cent to S$384.74 million despite revenue surging 20.3 per cent to S$2.92 billion.
CDL said that the earnings drop was due to absence of significant divestment gains from non-core investment properties as compared to the corresponding period, which had accounted for gains largely from the sale of 100G Pasir Panjang and strata units in Citimac Industrial Complex, Elite Industrial Building I, Elite Industrial Building II and GB Building. “Excluding such divestment gains from YTD Sept 2013, on a like-for-like comparison, the group’s core earnings would have increased by 25.5 per cent for YTD Sept 2014,” CDL said in its results statement.
Luxury project Marina One Residences opened its doors to the public on Saturday (Oct 11) but saw a lukewarm response, with only 20 units sold. Its developer had cleared 300 units in the past week during private sales.
Business owner Lim Jit Song, who was at the public launch, was looking for a unit for investment purposes. The 39-year-old eventually settled for a S$1.7 million one-bedroom unit on the 13th floor, which works out to almost S$2,300 per square foot (psf).
Mr Lim said: “First of all, the location is very good, it is in the Marina area. Price-wise, it is also very reasonable. We saw the furnishing and it is very good – we are very happy with that. There are three MRT stations around, and amenities within walking distance. The last point – the developer is very dependable. So with all these reasons … we decided to go for it.”
The project is a joint-venture between Temasek Holdings and Malaysia’s state investment arm Khazanah Nasional. It is their second residential development after DUO Residences in Bugis, which was launched in November last year. Buyers had snapped up more than 60 per cent of DUO’s 660 units in just three days. Prices had averaged S$2,000 per square foot, with over S$2,600 per square foot for a studio apartment.
Private sales for Marina One started on October 3 to those purchasing multiple units. The developer said the majority of its buyers are Singaporeans (70 per cent). Malaysians make up 20 per cent, while the remaining 10 per cent are Indonesians and Chinese.
One analyst described the sales as “commendable” for the current market, but said prices – which now range from S$1,960 to S$3,100 psf – might need to be lowered to further boost demand.
Ku Swee Yong, CEO of Century 21 Singapore, said: “The current competition of the unsold units along the Shenton Way stretch, up to Tanjong Pagar, as well as future Government Land Sales of parcels around Marina One would affect investment sentiments in the project.” Mr Ku said units from older projects nearby are going at competitive prices, averaging about S$2,000 to S$2,500 psf.
The launch of Marina One comes on the back of lacklustre sales in the city area, weighed down by property cooling measures. In the second quarter of this year, 95 high-end homes were sold, down from 121 units in the previous quarter and 365 units in the same period last year. Prices in the city area have also declined for the fifth consecutive quarter since Q1 2013.
Its developer is also taking a cautious stance. The project has two residential towers comprising about 1,000 units, but only one tower is currently open for sale.
SINGAPORE’S industrial property market is expected to remain mixed in the fourth-quarter of 2014, given the presence of persistent downside risks, which include uncertainties surrounding the global economic recovery and the traditional year-end holiday lull.
Colliers International on Thursday said in its report that replacement anchor sub-tenants will be harder to find when secondary industrial space becomes available from expiring sale and leaseback transactions.
Chia Siew Chuin, director of research and advisory at Colliers, said current anchor sub-tenants leasing space from third-party facility providers will enjoy stronger bargaining power in lease-renewal negotiations.
“This could hurt rents and yields achievable by the third-party facility providers in the medium term,” said Ms Chia, who added that rents for business parks and independent high-specs buildings are expected to hold steady in Q4, similar to Q3, mainly because of a tightening in supply.
But the prime conventional industrial segment, would probably have rents easing marginally further in Q4 on supply pressures, said Ms Chia.
Sale of strata-titled industrial properties is expected to remain slow, with the likelihood that the number of caveats lodged for the entire year will be below the 2,000-level.
The last time fewer-than-2,000 caveats were lodged for strata-titled industrial properties was in 2009 at about 1,500.
Ms Chia added that the average capital values of prime freehold conventional warehouse and factory space are expected to remain at their current levels in the next quarter.
The mixed outlook comes on the back of a muted industrial property market here in Q3, despite a stable stream of leasing activity.
Sale transactions of strata-titled industrial properties in Q3 fell by about 36 per cent quarter-on-quarter to 203, according to URA Realis caveats.
DTZ Research said this is way below the 672 strata-titled units that were sold in the same period last year. So far, there has been 842 transactions this year, much lower than the 1,986 in the same 2013 period.
DTZ said the decline in transactions was due to fewer new launches, seller’s stamp duty measures, as well as the implementation of the Total Debt Servicing Ratio (TDSR) framework last June.
Both average capital and rental values of conventional industrial space have also stagnated, while business park rents bucked the trend and continued to rise in Q3.
The average monthly gross rents for business parks continued to increase by 2 per cent quarter-on-quarter in Q3 to S$5.00 per sq ft, said DTZ.
Still, business park rents are lower than office rents and the former is drawing more office occupiers, said Cheng Siow Ying, DTZ’s executive director of business space.
“The difference in rents can be as high as 30 per cent, compared with the average office rents in the decentralised areas,” she said.
The downward pressure on rents for conventional industrial space might continue, said DTZ.
A total of 40.7 million sq ft of industrial space is expected to be completed by 2016, of which 27 per cent are multiple-user factories.
Lee Lay Keng, DTZ’s regional head (South-east Asia) research said the large supply in 2016 is “likely to restrain rental growth”.
“The older business parks may find it increasingly difficult to retain and attract tenants alongside these newer business parks,” said Ms Lee.
CBRE said in its report that the difference in rents between business parks located in the city fringe and those in the rest of the island has widened further in Q3 this year.
Michael Tay, executive director, office services at CBRE said: “Occupiers are more keen on higher specifications, quality developments which the city fringe has been able to provide. The location and connectivity are also important considerations which prompt occupiers to pay the premiums in rent. “
New rules proposed for the booming real estate investment trust (Reit) sector will bring more disclosure over executive pay, shake up the fee structure and ensure that the interests of unitholders are paramount.
The proposals were unveiled by the Monetary Authority of Singapore (MAS) yesterday in a consultation paper aimed at strengthening what has become an industry with assets of around $61 billion and a large following among retail investors.
Reit managers said some of the proposals could benefit the industry and investors, although others might make it tougher for trusts to compete.
One key proposal is that managers and directors should have a statutory duty to prioritise investors’ interests over those of the Reit manager and sponsor.
This could help guard against conflicts of interest, and may prevent Reits from overpaying for assets bought from their sponsors, for instance.
It is also proposed that Reits change how a manager’s performance fees are structured so that they are aligned with investors’ long-term interests.
Reits may also be required to disclose more information in their annual reports, including how much income support they get.
Income support involves the Reit sponsor stepping in to top up a property’s income if it falls short of certain thresholds. But the practice could lead to the property being overvalued.
The suggested rule changes would also give Reits more flexibility to develop property.
Trusts can now develop a project only if the cost does not exceed 10 per cent of the trust’s total asset size, but that limit could be raised to 25 per cent.
Ascendas Reit (A-Reit) told The Straits Times yesterday that the move to address any perceived potential conflicts of interest could benefit the market.
“The interests of unitholders must rank supreme,” an A-Reit spokesman said in an e-mail.
A-Reit also welcomed the higher development limits, but pointed out that disclosing certain information about leases “may compromise a Reit’s strategy and competitiveness” and therefore may not benefit unitholders.
“In the longer term, it may be necessary to consider an independent Reit legislation to govern the industry,” A-Reit added.
Other Reits said they were still reviewing the consultation paper.
There are 33 Reits in Singapore, accounting for around 8 per cent of the Singapore Exchange’s total market value.
Reit market watchers said the proposals would bring industry practices and requirements closer to those already in place for listed corporate boards.
“There will be greater clarity on the duty of Reit managers,” said Mr Robson Lee, partner at law firm Shook Lin & Bok.
Ms Rachel Eng, who heads the Reits team at law firm WongPartnership, said: “Hopefully, the market and the MAS will identify the right combination of rules that will enhance corporate governance and accountability.”
The consultation paper is available on the MAS website. Members of the public have till Nov 10 to send their feedback.
Business parks remain a bright spot amid the gloom surrounding industrial property, with rents moving up in the third quarter, said consultants DTZ.
It noted that average monthly rent was $5 per square foot (psf) in the three months to Sept 30 – up 2 per cent on the second quarter, a rate of growth that has been maintained all year.
The demand for business parks was due in part to “the spillover from higher office rents”, DTZ reported yesterday.
“There are more cases of qualifying office occupiers who are drawn by the lower business park rents relative to office rents,” said Ms Cheng Siow Ying, DTZ’s executive director of business space. She noted that the difference in rent can be as high as 30 per cent.
Ms Cheng cited Galaxis, a business space in one-north slated to be completed by the end of the year. It has already garnered a pre-commitment rate of more than 40 per cent, with signed leases from firms such as Canon, Oracle and Electrolux. “The movement of qualifying office occupiers to business parks is expected to continue as average office rents continue to rise,” she added.
While business parks are enjoying better times, average monthly rent for some conventional industrial space has stayed flat. First-storey rents came in at $2.20 psf from the second quarter while those for upper floors stayed at $1.80 psf.
There were 203 sales of strata-titled industrial property in the third quarter, down about 36 per cent from the second quarter. There have been 842 transactions so far this year, significantly lower than the 1,986 in the same period last year.
A report from CBRE, also out yesterday, found that the rent gap between business parks in the city fringe and those in the rest of the island widened to 33 per cent in the third quarter, up from 29 per cent in the second quarter.
“Occupiers are more keen on higher specifications and quality developments which (business parks in the) city fringe have been able to provide,” said Mr Michael Tay, executive director of office services at CBRE.
“Location and connectivity are also important considerations which prompt occupiers to pay the premiums in rent.” He added that the difference in rent for business parks in the city fringe and those in the rest of the island is expected to “stabilise”. “Rent in new developments will edge up but this increase is likely to be restrained by older assets that offer more competitive rents.”