No Asia Square sale to ARA on expiry of exclusive talks

20160311-bt-no-asia-square-deal-to-ara-pic This may be related to its proposed partner, KIC of South Korea; CapitaLand says it "currently has no plans to bid"

BLACKROCK'S exclusive negotiation period on the sale of Asia Square Tower 1 to a consortium led by ARA Asset Management has ended without a deal being concluded, BT understands.

The asset management giant, however, is said to be still in discussions with ARA but may also reach out to other parties, including CapitaLand, which was the original preferred bidder when an expression of interest exercise for the 43-storey office tower closed in August last year.

In early November, however, CapitaLand confirmed that negotiations had ceased "for now". When contacted on Thursday, a spokesman said: "CapitaLand currently has no plans to bid for Asia Square."

Market watchers suspect that posturing may be at play.

ARA had initially expressed interest for 100 per cent of the central business district property but is later said to have reduced this to 66 per cent; even then, BlackRock was willing to consider a sale.

Nevertheless, a deal with ARA has proved to be elusive and some observers suggest that this could have something to do with its proposed consortium partner, Korea Investment Corporation (KIC). In January, the sovereign wealth fund of South Korea announced that it had appointed a new chief executive officer.

When contacted on Thursday, BlackRock's spokesman reiterated that "negotiations with potential buyers of this asset continue" .

"While we are not in a position to comment on the details, we are pleased to have received significant global interest in this high-quality asset and are currently working to achieve the best outcome for our investors."

The initial price tag for Asia Square Tower 1 last year was touted at S$4 billion or about S$3,200 per square foot on net lettable area of 1.2 million sq ft of offices and 40,000 sq ft of retail space.

Market talk is that the discussions with both CapitaLand and later ARA were based on a lower price range of S$2,700-2,800 psf. At this pricing band, the net yield based on current occupancy works out to slightly above 3 per cent.

However, Google is due to move out of the building later this year to Mapletree Business City 2 in the Pasir Panjang area. Google's lease for 130,000 sq ft at Asia Square Tower 1 expires late this year.

Asia Square is owned by BlackRock Asia Property Fund III, formerly known as MGPA Asia Fund III. The fund is said to expire in mid-2017, although in a typical fund structure, there would be options for further extensions.

MGPA, which was acquired by BlackRock in 2013, developed Asia Square on two 99-year leasehold sites that it clinched at separate Urban Redevelopment Authority tenders in 2007.

Source: Business Times, 11 Mar 2015