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Investment property sales drop in Q1

FROM a high base in the fourth quarter of last year, big-ticket property transactions of at least S$10 million declined substantially in the first quarter.

However, the mood in the market is decidedly positive – with much anticipation of the imminent mega transactions of Jurong Point mall, and Asia Square Tower 2 in the CBD.

“Investment market sentiment is positive and the price gap has mostly disappeared except for hotels,” said CBRE executive director, capital markets, Jeremy Lake.

In particular, the tone of investors towards the office sector seems to have reversed dramatically. “The oversupply in the Singapore office market is yesterday’s story, and today’s story is all about the recovery and rental growth,” said Mr Lake.

Figures compiled by Savills Singapore showed that S$5.2 billion of investment sales of property, as these big deals are known, were sealed in Q1, down 34.8 per cent from S$8 billion in Q4 last year. However, the Q1 number is double the S$2.5 billion in the same year-ago period.
Photo: The Business Times
Photo: The Business Times

Both Savills and Cushman & Wakefield (C&W) estimate that some S$2.7-2.8 billion of deals in the commercial property segment were transacted in January to March this year – giving it a share of slightly over 50 per cent of total investment sales.

Major transactions include the S$881 million sale of a 70 per cent stake in TripleOne Somerset by a consortium led by Perennial Real Estate Holdings to Stanley Ho’s Hong Kong-listed Shun Tak Holdings, and Manulife’s S$747 million purchase of PwC Building at 8, Cross Street, from DBS.

Savills said the S$2.8 billion of commercial property investment sales in Q1 was a 41.9 per cent increase from the nearly S$2 billion in the previous quarter.

The residential sector saw S$2.1 billion of big-ticket sales in the first quarter, giving it a 40.2 per cent share. On a quarter-on-quarter basis, however, the Q1 tally was down almost 12 per cent, according to Savills.

C&W Singapore research head Christine Li highlighted the flurry of bulk residential sales in Q1 as some foreign housing developers sought to offload their remaining unsold units ahead of regulatory sales deadlines imposed on them under the government’s Qualifying Certificate rules – to avoid paying hefty penalties.

A string of last-minute deals were also inked on the night of March 10 – including TwentyOne Angullia Park, The Line @ Tanjong Rhu, Robin Residences and The Lumos – before the new Additional Conveyance Duties (ACD) took effect the next day.

The ACD plugged a loophole that some bulk buyers in Singapore residential projects had been using to enjoy significant savings in stamp duties.

Savills Singapore managing director Steven Ming said: “Unless annual residential prices are expected to rise significantly in the coming years, it is unlikely that institutions will return to the bulk residential sales market as the hefty 18 per cent stamp duty cuts deep into their required rates of return.”

The effect of this would be the shift of interest by institutional investors to other sectors of the real estate market here, he added.

Industrial properties posted S$344.2 million of investment sales in the first quarter, down 67.8 per cent quarter-on-quarter.

CBRE and Savills expect the total investment sales for 2017 to be in the S$18-20 billion region – down from around S$23 billion last year. C&W expects the number to remain in the S$20 billion range.

Mr Ming of Savills commented that with institutional investor interest expected to be diverted from residential towards the office, retail and hospitality sectors here, investment sales are expected to continue despite yield compression.

“As both private equity funds and ultra high net worth individuals have either raised new money or have a need to diversify to reduce concentration risk, yields have potential to remain low and go lower as prices will either hold firm or even edge up,” he reasoned.

Ms Li of C&W noted office asset prices are already starting to trend upwards, with rents expected to bottom this year.

In similar vein, CBRE Research’s head of Singapore and South-East Asia, Desmond Sim, argued that as the office recovery story gets more real in terms of rising commitment rates for new projects such as Marina One, this will push more institutional investors to be ready to commit.

CBRE predicts that by the end of the year, seven out of 10 institutional investors who are looking at the Singapore office sector will be ready to buy – up from five out of 10 investors now, which in turn is a higher ratio than just one out of 10 investors a year ago.

Regina Lim, JLL’s head of capital markets research, South-east Asia, observed that in the past four years, Singapore has seen a gradual decline in office demand, retail sales, food and beverage receipts, and gross domestic product growth.

As a result, the republic’s attractiveness to overseas institutional investors has waned, and they have gravitated to Australia, Japan and China commercial property, which have stronger growth stories.

“However, capitalisation rates in these markets have compressed and now Singapore looks less expensive in comparison to these markets.”

Mr Sim of CBRE said that on the residential sector front, while bulk purchases of units from developers have now become harder to do, there may be a bright spot in collective sales. “We should see more interest in en bloc sales from land-hungry developers, especially in the face of limited supply through the Government Land Sales Programme.”
– See more at: http://news.asiaone.com/news/business/investment-property-sales-drop-q1#sthash.8H86fsyp.dpuf

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Perennial selling huge stake in TripleOne

TripleOne Somerset is a prime integrated development comprising two premium-grade office towers and a retail podium next to Somerset MRT station. Perennial Real Estate Holdings (PREH) is leading a group of investors that are selling their combined 70 per cent stake in TripleOne Somerset to Hong Kong’s Shun Tak Holdings.

PREH and six other shareholders of Perennial Somerset Investors (PSI), their holding company for TripleOne Somerset, are offloading a combined 61 per cent stake in the property for $305 million. PREH, which originally held 50.2 per cent of PSI, is divesting a 20.2 per cent slice while retaining 30 per cent. It will collect about $101 million for the sale, making a pre-tax gain of about $34.3 million.

The other six shareholders, all of whom have fully divested their stakes in PSI, are SingHaiyi Group, Boustead Projects, BreadTalk Group, Shun Fung Holdings, ROOI Holdings and Grandma’s Holdings.

Unified Elite Limited, another existing shareholder of PSI and a connected person to Shun Tak, will sell its 9 per cent stake to Shun Tak. The sale price was based on an agreed total property price of about $1.258 billion, or $2,200 per sq ft. The divestments are expected to be completed by June 30.