Alpha fund buys rest of 78 Shenton Way

20160406-bt-alpha-fund-buys-rest-of-78-shenton Half stake, which comes from Commerz Real, prices the property at S$1,665 psf

A PROPERTY fund managed by Alpha Investment Partners has taken full ownership of 78 Shenton Way after buying out partner Commerz Real's half stake in the asset.

Alpha Investment Partners is part of Keppel Corporation.

The transaction, said to have been done three weeks ago, was effected through the sale of shares in the special purpose vehicle that holds 78 Shenton Way. The deal priced the entire property (100 per cent interest) at about S$603 million or S$1,665 per square foot on its total net lettable area (NLA) of 362,199 sq ft, BT understands.

Hence the half-stake works out to S$301.5 million.

The development comprises two towers built at different times on a site with a balance lease term of 66 years.

The S$1,665 psf pricing for the transaction is said to reflect a net yield of around 4 per cent.

Commerz Real of Germany, which held the half-stake in 78 Shenton Way through an open-ended global fund that it manages, last year appointed CBRE to find a buyer for its stake. Potential buyers are believed to have submitted their offers late last year with competitive bids. BT understands that Alpha did not express interest at that stage; nor did it have a first right of refusal on Commerz Real's stake.

Alpha is said to have entered the picture earlier this year; Commerz Real may have chosen to work with its existing partner in the asset for deal certainty. The Alpha fund also had the advantage of being familiar with the asset and could transact swiftly.

The older Tower 1, which is 34 storeys high, is a granite-clad building with NLA of 284,622 sq ft. Completed in 1988, it has unobstructed sea views beyond the Tanjong Pagar container terminal.

Tower 1's occupancy is 95 per cent, with a variety of tenants including IPP Financial Advisors and companies in the shipping and related businesses.

The 11-storey Tower 2, which was completed in 2009, is a glass-clad office block built to Grade A office specifications. Its 77,577 sq ft NLA is fully let; a chunk of the space in this tower is leased to AIG till late-2019.

Based on a BT report last October, the average monthly passing rent for Tower 1 is around S$6.70 psf, and that for the newer Tower 2, in the region of S$9.50 psf.

Going by 78 Shenton Way's current gross floor area (GFA) of close to 494,400 sq ft, there is no untapped GFA. That said, there is potential to extract a higher NLA in the older block - for instance, by relocating the air handling units and reconfiguring the lift core and lift lobbies. Furthermore, the existing granite exterior may be replaced with floor-to-ceiling glass - to maximise sea views.

In a separate transaction, a 999-year leasehold shophouse at 83 Amoy Street has been sold for S$20.25 million. Standing on a 2,795 sq ft site, the four-storey property has a gross floor area of around 8,400 sq ft.

The buyer is a vehicle linked to Spanish tycoon Ricardo Peralta; the seller is Rikvin Properties, the owners of which are involved in the corporate service and consultancy group. PropNex brokered the deal.

Last year, Rikvin sold a pair of adjoining shophouses along Telok Ayer Street to the same vehicle controlled by Mr Peralta, for S$18.2 million.

Another recent shophouse deal was 37 Craig Road, which went for S$6.5 million. The three-storey property is on a site with about 72 years' balance lease. The buyer is boutique property investment group 8M Real Estate and the seller, The Composers and Authors Society of Singapore. Historical Land brokered the sale.

Source: Business Times, 6 Apr 2016