ALLIANZ

Gaw Capital, Allianz in talks to buy Duo office, retail space for over S$1.5b

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A GAW Capital Partners-led consortium that is expected to include Allianz Real Estate is negotiating to buy the office and retail space at the Duo project in the Bugis area.

The Business Times understands that a deal has yet to be inked. The pricing being discussed is expected to be shy of S$2,600 per square foot for the total net lettable area (NLA) of about 615,000 sq ft for the office and retail space.

Assuming the pricing comes in at, say, S$2,570 psf, the absolute price would work out to S$1.58 billion.

The mixed development also includes the 342-room Andaz Singapore hotel, for which separate negotiations are still ongoing for a sale to RB Capital, BT understands.

The Duo project was developed by M+S Pte Ltd, a 60:40 joint venture between Malaysia's Khazanah Nasional and Singapore's Temasek Holdings.

It sits on a site with 99-year leasehold tenure that starts from July 1, 2011, leaving about 91 years on the lease.

The project's office component, known as Duo Tower, occupies levels 4 to 23 of the 39-storey tower in the mixed development. The office NLA is about 560,000 sq ft; tenants include Abbott Laboratories, Chevron and Mastercard.

Andaz Singapore occupies the upper levels of the same tower.

The Duo project's other tower, which is 49 storeys high, is where the 660-unit Duo Residences, is located. Three of these residential units were unsold as at March 31, 2019, based on data from the Urban Redevelopment Authority.

The development's retail component, Duo Galleria, comprises about 55,000 sq ft NLA on Level 1 and in Basement 3.

Designed by renowned architect Ole Scheeren, the Duo project received its Temporary Occupation Permit in stages between end-2016 and end-2017.

An expression of interest exercise to seek buyers for the Duo office and retail space as well as Andaz Singapore began around October last year.

M+S declined to comment when approached by BT, as did Gaw Capital as well as Allianz Real Estate.

Last November, the property investment arm of insurance giant Allianz acquired a 20 per cent stake in Ocean Financial Centre, a Grade A office tower in Singapore's Central Business District, for S$537.3 million.

Hong Kong-based Gaw Capital Partners, a private equity firm set up by brothers Goodwin and Kenneth Gaw, owns two properties near the Duo project: Hotel G in the Bencoolen Street and Middle Road locale and PoMo in Selegie Road.

In January this year, Gaw Capital completed its acquisition of Robinson 77 for S$710 million.

If Gaw Capital and Allianz Real Estate forge a tie-up to acquire the office and retail space at Duo, this would mark their latest partnership.

In 2017, Allianz Real Estate participated in Gaw Capital's acquisition of PoMo.

Last year, Allianz joined Gaw Capital to buy two out of the four office blocks in the Sky SOHO development in Shanghai's Hongqiao District.

In the same year, Allianz announced that it had acquired a 50 per cent interest in a portfolio of core modern logistics assets across China. The assets were developed by Vailog China and are owned by a Gaw Capital-managed fund. Vailog China and Gaw Capital Partners continue to hold the remaining 50 per cent interest as well as manage the assets.

Based on data from Savills Singapore, office transactions (of S$10 million and above) in the private sector so far this year have totalled S$1.9 billion. The figure for the whole of last year was S$5.2 billion.

Foreign investors continue to be drawn to the Singapore office market, notes Alan Cheong, executive director of research and consultancy at Savills Singapore. "Most overseas institutional investors are keen on buying Singapore office assets, but there is a dearth of investible-grade stock that is available for sale. The challenge is that yields have been compressed due to owners' rising price expectations; it is difficult to write an investment paper seeking approval from a property fund's investment committee to make an office acquisition in Singapore based mainly on prospects of capital appreciation without corresponding rental increase."

Source: Business Times, 31 May 2019