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Singaporean private equity firm TE Capital Partners and US-based LaSalle Investment Management have just finished purchasing a downtown office building on Cecil Street for S$323.8 million ($240.6 million) in an effort to capitalize on Singapore’s recovering office market, which is expected to be driven by an influx of tech and finance tenants.
The PIL Building, a 17-story freehold office skyscraper located at 140 Cecil Street in Singapore’s central business district (CBD), was recently purchased from financially troubled shipping company Pacific International Lines (PIL) by a joint venture between LaSalle and TE Capital.
Managing Director of TE Capital Emilia Teo said in a statement on Tuesday, “On behalf of our shareholders and investors, we are happy to add this key asset in Singapore to our assets under management through our JV with LaSalle Investment Management.” “We have seen rising office demand in Singapore’s Central Business District from technology and financial services tenants and anticipate a reasonable amount of new supply entering the market in the next several years.”
This agreement is in line with a recent uptick in value-add investments in Singapore by money managers looking to take advantage of government incentives for restoring or replacing outdated properties in order to increase returns.
TE Capital and LaSalle paid about S$2,198 per square foot for the building’s current 147,315 square feet of gross floor area. This is about 7.5% less than the building’s original asking price of S$2,376 per square foot when it was listed for S$350 million in the middle of 2020.
Potential of the Site
According to the government’s 2019 Master Plan, the structure may be converted into a 30-story commercial skyscraper with a gross floor space of 218,434 square feet.
Redeveloping the property as a class A office building, the JV, with TE Capital as the operating partner, will aim for Singapore’s Green Mark standard Platinum certification for sustainable buildings and feature ceiling heights of 4.9 meters and floor plates that can accommodate single or multiple tenants.
The PIL building occupies a 1,815-square-meter freehold site in the heart of Singapore’s financial district, near to four major transit stations and ten minutes’ walk from major office buildings along Robinson Road like Gaw Capital’s Robinson 77 and CapitaLand’s Capital Tower.
Claire Tang, co-chief investment officer for Asia Pacific at LaSalle, a Chicago-based real estate investment giant with $73.4 billion in assets under management, said, “This asset is a welcome addition to our portfolio as we continue to see demand for Grade A offices from global institutional investors in the Singapore office space and occupier needs for office space from international companies and financial institutions despite the pandemic.”
PIL, the former owner, is leasing back the building for a limited time so that it may continue to serve as its headquarters.
The purchase was made by funds managed by LaSalle and TE Capital, and the sale was negotiated by Cushman & Wakefield, according to the announcement.
Business in the Office Sector Remains Strong
The new asset, Solitaire on Cecil, according to TE Capital Terence Teo, will allow the JV to “capitalize on an uptrend for the demand in office market Singapore,” as Singapore was the 5th most active real estate hub in the Asia Pacific in 2018, with total volume of transactions that goes up nearly three times to $9 billion in 2021.
According to Shaun Poh, at Cushman & Wakefield, many sites in the area have freehold titles, and incentive schemes offered from URA that increase plot ratios of old buildings along Robinson Road and neighboring streets between Tanjong Pagar and Raffles Place.
Shenton Way, Cecil Street, and Robinson Road are particularly desirable since “freehold commercial lands are scarce in CBD settings.” On Tuesday, Poh made the following statement. Investors are flocking to the Central Business District because of the area’s rapid rental increase. Also, Singapore has been a refuge, particularly for business property.
Recent purchases along the strip have confirmed investors’ enthusiasm for the neighborhood. In December, for example, German investment group AM Alpha paid S$269.7 million for Robinson 112, an office asset located just two blocks from the PIL Building.
61 Robinson Road was purchased by local financial management company Rivulets Investments in September of last year for a reported S$422 million from ARA Asset Management, which was then bought by ESR.