A NEW party is in exclusive negotiations with BlackRock to buy Asia Square Tower 1. This time, sovereign wealth fund Qatar Investment Authority (QIA) is said to be the potential buyer.
The price is estimated at around S$2,700 per square foot of net lettable area (NLA). Based on the 43-storey tower's 1.2 million sq ft of offices and about 40,000 sq ft of retail space, the lumpsum price would be around S$3.35 billion.
Asia Square is owned by BlackRock Asia Property Fund III, formerly known as MGPA Asia Fund III.
When contacted, QIA's spokesman declined to comment.
The sovereign wealth fund (SWF), through its unit Katara Hospitality owns the iconic Raffles Hotel in Singapore. Last year, QIA partnered Singapore's The Ascott, a unit of CapitaLand Group, to set up a 50:50 US$600 million fund to invest in serviced residences and rental housing properties. The fund's initial focus will be on Asia Pacific and Europe. To date, it has bought three properties - in Paris, Tokyo and London.
As part of its strategy, QIA is investing up to US$20 billion in Asia - and this includes a US$10 billion joint venture fund with Citic Group of China. The SWF also plans to invest US$35 billion in the US in the coming years.
It acquired the Canary Wharf Group last year through a joint venture with Brookfield Property Partners. In addition QIA owns HSBC's global headquarters in Canary Wharf.
In the US, QIA has taken a stake in Brookfield's US$8.6 billion mixed-use project, Manhattan West, in the far west side of New York.
It also owns Harrods department store in London.
The SWF aims to diversify the oil and natural gas-rich Middle Eastern country's wealth across geographies, sectors and asset classes.
BlackRock could not be reached for comment. In 2013, it acquired MGPA, which developed Asia Square on two 99-year leasehold sites that it clinched at separate Urban Redevelopment Authority tenders in 2007.
Last year, BlackRock put Tower 1 on the market through an expression of interest exercise that closed in August. CapitaLand emerged as the preferred bidder from that exercise but said in early November that negotiations had ceased "for now". ARA Asset Management later entered exclusive negotiations for the asset but no deal resulted from that either.
Some market watchers are hopeful that a transaction will materialise this time and give a much-needed boost to the lacklustre Singapore property investment sales market.
Office rents on the island have been sliding due to a substantial jump in new office completions this year and next, amid weak office demand.
Colliers International managing director of capital markets and investment services for Asia, Terence Tang, said: "Singapore has been and still is a favourite market among institutional investors when it comes to commercial property - particularly for a well-specified product such as Asia Square." The challenge, however, lies in finding the right asset at a price that will yield the desired returns.
"With the threat that the cost of funds will continue to appreciate, investors with a shorter-term horizon will seek a higher property return. It would be great for Asia Square to be able to find a core investor prepared to hold the asset for the long run and who will be less susceptible to the volatility of the office market cycle - as this is one of the rare Prime Grade A office buildings available for sale not only in Singapore but Asia."
A deal on Asia Square Tower 1 was expected to have been sealed by the end of last year.
The initial price tag was touted at S$4 billion or about S$3,200 psf on NLA. However, the discussions with both CapitaLand and later ARA were based on a lower price of around S$2,800 psf.
Tenants in the tower include Citi, Julius Baer, Marsh and Google. Google, which occupies about 130,000 sq ft, has not renewed its lease which expires later this year; instead the tech giant is heading to Mapletree Business City II in the Pasir Panjang area.
Observers believe that the successful buyer of Asia Square Tower 1 would likely seek a right of first refusal to acquire the rest of BlackRock's space in the Asia Square development. This comprises some 750,000 sq ft of offices and 30,000 sq ft of retail space in Tower 2.
Source: Business Times, 20 May 2016