Bugis Junction Towers might change hands soon. As per reports in the media, US based Angelo Gordon, an alternative investment manager is conducting due diligence with an aim to acquire the office block located above Bugis MRT Station.
According to those watching the deal closely, the 15-storey building currently owned by Keppel Reit is expected to garner rate of approximately S$2,200 psf for its net lettable area and this would make it a deal of approximately S$547 million.
Last year the property was valued at S$515 million taking in account its 248,853 sq ft NLA or a rate of S$2,069 psf
Those in knowledge of the property say that the current price would mean a low 3% yield given the income the owners generate from existing leases.
At present Bugis Junction Towers is fully occupied. The anchor tenant Enterprise Singapore has a long-term lease.
Among other tenants in the office block include UCommune, the co-working space provider and InterContinental Hotels Group.
Bugis Junction Towers is part of a large mixed development that includes Frasers Hospitality Trust’s InterContinental Singapore and another mall that is owned by CapitaLand Mall Trust.
The site where the complex stands has 70 years remaining in lease balance.
Though there has been no official confirmation it is believed that Cushman & Wakefield is marketing Bugis Junction Towers.
The property consulting group had last year been appointed by the Towers’ owner Keppel Reit to undertake an informal EOI exercise with a view to find prospective buyer for the office tower.
The exercise was unsuccessful as all the bids that came through were below the expectation of the owners who targeted a rate of S$2,300 psf
Angelo Gordon the prospective buyer for this property had a strong footprint in Singapore and currently has 22 units in the condo Draycott Eight.
These were bought back in the year 2017 from Alpha Investment Partners for more than S$100 million.
Keppel Group’s asset management arm Keppel Capital owns Alpha Investment Partners. The sale of Bugis Junction Towers would join the ranks of large ticket office towers that have been sold in the recent months.
This was acquired by a partnership of Gaw Capital Partners and Allianz Real Estate. The property has 91 years left on its 99-year lease tenure. This deal was brokered by JLL.
In similar developments, 71 Robinson Road was brought by Sun Venture Group from Commerz Real for S$655 million.
hausInvest, the open-ended property fund of Commerz Real sold it to the group that is financed by investors from Singapore as well as Taiwan.
The property’s net lettable area of 237,644 sq ft changed hands for S$2,756 psf. This reflected a yield of 3.6% on the property’s income before the sale.
Located at the junction of McCallum Street and Robinson Road the property was sold with little more than 73 years remaining on its lease balance. JLL and CBRE had brokered that deal.
Apart from these two office tower deals that have been recorded in the last few weeks, other transactions this year include 7 & 9 Tampines Grande, Mega Deal at Raffles Place Chevron House and 50% stake sale in Frasers Tower.
According to data compiled by Savills Singapore, S$5.14 billion worth of office space in the bracket of S$10 million and above has been transacted this year so far.
This is slightly less than the S$5.24 billion transactions that were recorded in 2018. This is however much lower than the S$7.5 billion worth transactions in 2017.
Galven Tan, Executive Director of Capital Markets at CBRE said that in most cases the net yields in the transactions have been lower and they have ranged between 3-3.5% this year which is lower than the 3.5-3.75% that was witnessed two years back.
This has been due to the fact that office prices are up as compared to rental growth and most new entrants in the market are factoring in the lower supply of new and quality office spaces.
He also added that in most cases the yields have been subject to the property involved where lease-expiry factor is being considered apart from the traditional factors such as location of the building and its condition.
According to him, office market has become tricky as the deal sizes have become larger and the yields are lower as compared to other types of assets.
Mr Tan concluded by saying that there is relative stability in the office market in Singapore given the fact that there is transparency in all the transactions.