CCT buys Asia Square Tower 2 for S$2.09b

SINGAPORE — CapitaLand Commercial Trust (CCT), Singapore’s largest office landlord, is acquiring Asia Square Tower 2 at Marina Bay for S$2.09 billion in a mega-deal that analysts said will lift sentiment in the commercial property sector.

The purchase of the building, from a property fund of the world’s biggest asset manager BlackRock, is the largest office transaction in the Asia-Pacific region this year.

CCT will finance the acquisition through a combination of a S$700 million rights issue, bank borrowings of S$1.1 billion and proceeds of about S$340 million from the divestments of One George Street (50 per cent stake), Golden Shoe Car Park and Wilkie Edge, said the property trust in an announcement filed with the SGX yesterday.

“The sale of Asia Square Tower 2 continues the trend of buyers being attracted to mega deals in Asia. The sales process generated strong interest from major global investors and sends a clear message about the continued recovery of the Singapore office market,” said Mr Stuart Crow, head of Asia Pacific Capital Markets at property firm JLL, which advised the seller on the deal.

Ms Christine Li, director of research at property consultancy Cushman & Wakefield said: “The transaction of Asia Square Tower 2 will boost confidence for other long-term investors to venture forth and place more aggressive bids for their desired properties or land sites.”

Located in the heart of Marina Bay, Asia Square Tower 2 is a 46-storey integrated commercial development comprising a Grade A office building and amenities including The Westin Singapore and a two-storey retail podium. Completed in September 2013, it is one of the newest buildings in the Marina Bay area and is easily accessible via an extensive public transport network, said CCT.

The office and retail units in Asia Square Tower 2 have a combined net lettable area of 778,719sqf, and the purchase price translates to about S$2,689psf. The deal — targeted to be completed by November — is expected to provide a net property income yield of 3.6 per cent per annum based on a committed occupancy rate of 88.7 per cent as at June 30, said CCT.

“Despite the record four million sqf of Grade A office supply and a 19 per cent rental correction experienced in the past two years, office capital values have remained resilient. As at the third quarter, Grade A office capital values rose by 5.4 per cent, supported by institutional and high-net-worth-individual investors with a long-term investment horizon,” said Ms Li.

“The turnaround in office rents also led to investment activity in the sector. Office leasing activity is expected to pick up as business sentiment continues to strengthen, with Grade A CBD rents projected to increase by up to 10 per cent in 2018. A two-tiered office market has emerged with new projects enjoying higher occupancy and rental recovery, while the older and less efficient office buildings are likely to come under pressure in the years ahead as they struggle to backfill the space vacated by tenants relocating to newer developments.”

The latest deal comes after Qatar’s sovereign wealth fund bought Asia Square Tower 1 for S$3.4 billion from the BlackRock property fund last year, in what remains Singapore’s largest office building transaction.

Trading in CCT units was halted for the announcement yesterday. The units closed at S$1.695 each on Monday, marking a year-to-date gain of 14.5 per cent, outperforming the 11.6 per cent gain in the benchmark Straits Times Index.