CapitaLand Commercial Trust (CCT) in its bid to reorganize its portfolio has decided to sell Tanjong Pagar located Twenty Anson. The deal for this 20-storey office tower has been inked for S$516 million with an undisclosed buyer making this the biggest office-realty sale for the year.
This deal was announced by trust’s manager last week after months of speculation in the media over CCT’s plans to disinvest the property as a part of its portfolio reconstitution exercise.
The deal that was arrived after several rounds of bids would fetch CCT a price that is 19.2% premium over S$433.0 million valuation that was arrived in at last December and also 20% more than what it had paid to acquire the property for S$430.0 million in 2012.
The deal was brokered by Cushman & Wakefield (C&W) which stated that this was the biggest full-office deal in 2018 so far and is way above the S$247 million that was fetched by MYP Plaza.
Shaun Poh, Executive Director of Capital Markets at C&W said that this deal concludes a great quarter in the office space market which has witnessed recovery in office rentals in prime location for the last few quarters.
He added that investors are buoyant as far as Singapore’s office rental space is concerned in prime locations as over the next few years there would be depletion in office supply in prime locations.
Under the deal Twenty Anson has sold the space at a rate of S$2,503 psf taking into account the building’s net area to let that stands at 206,000 sq ft. The site has 88½ years lease tenure remaining.
The property was 94.3% occupied as per the last survey in March 2018 with BCD Travel Asia-Pacific, BlackRock Advisors Singapore and Toyota Motor Asia-Pacific being its major tenants.
As far as CCT’s net income from property is concerned Twenty Anson accounted for just 3%. As per the Trust the impact on its income from this sale would be neutral under the pro-forma basis as the loss in income would be compensated by the saving on interest rates on its loan repayments.
This sale would translate into 2.7% property yield for the trust as Twenty Anson fetched an income of S$13.8 million over 12 months ending 31st March 2018.
Considering the fact that the sale proceeds would be used to meet existing debt, aggregate leverage for the trust would come down to 34.5% compared to the current 37.9%.
Chief Executive Officer at CCT Mr Kevin Chee said that Twenty Anson’s disinvestment is a part of the trust’s well devised strategy for reconstituting its portfolio and also increasing the returns for its unit holders.
With this deal CCT has exited from the property market in city fringe and would now focus on prime locations such as Marina Bay and Raffles Place.
CapitaLand Commercial Trust has also been rationalizing its office space kitty. In 2017 had acquired Asia Square Tower 2 retail and office space in a deal amounting to S$2.1 billion.
It had also acquired the remaining 60% stake in CapitaGreen (erstwhile Market Street Car Park) for S$393 million in 2016.
In 2017 it had also parted 50% of its stake in One George Street located just 400 m from Raffles Place MRT Station in a deal valued at S$592 million and also sold Wilkie Edge located in Selegie area for a sum of S$280 million.
It had acquired 94.9% stake in Galileo an office skyscraper located in Frankfurt’s banking district for €356 million (S$565.7 million).
Mr Chee added that CCT is always exploring opportunities to enhance its portfolio and this has been well demonstrated in CapitaSpring’s development and acquisition of office space in Frankfurt.
Twenty Anson’s divestment is likely to be formalized by the end of the third quarter and by that time CCT would have 10 properties with 4.7 million sq ft lettable area in Singapore’s CBD and Frankfurt.