TripleOne Somerset: Pacific Star's Asia Real Estate Income Fund (AREIF) paid $1.01 billion or $1,836 psf on net lettable area in early 2008 for the property, which it bought from Singapore Power and Public Utilities Board. - BT FILE PHOTO
A CONSORTIUM led by Perennial Real Estate Holdings has finally secured TripleOne Somerset. The price is understood to be $970 million in a deal concluded over the weekend.
This is $10 million less than the $980 million amount that Perennial, headed by Pua Seck Guan, was earlier doing due diligence to buy the asset under a letter of intent granted by the building's owner, a fund managed by Pacific Star. However, in late September, Perennial aborted the proposed transaction after the fund raised the asking price to $1 billion.
At least one other potential buyer, Lend Lease, is understood to have been approached. The Australian property giant did due diligence but when no deal materialised, Perennial was brought back into the picture.
The $970 million transacted price for Triple One Somerset works out to about $1,714 psf on the property's net lettable area (NLA) of around 566,000 sq ft. This includes some 60,000 sq ft of retail space, with offices making up the rest. Formerly known as the Singapore Power Building, the 17-storey property is on a site with a balance lease term of about 61 years. It is located opposite Somerset MRT Station, Jones Lang LaSalle and CBRE brokered the transaction.
Singapore-based Pacific Star's Asia Real Estate Income Fund (AREIF) paid $1.01 billion or $1,836 psf on NLA in early 2008 for the property, which it picked up from Singapore Power and Public Utilities Board. AREIF is said to have later invested about $80 million sprucing up the asset, including converting its first two levels to retail space and revamping the entrance and lobby.
AREIF's investors are said to include Great Eastern, Qatar Investment Authority and German funds.
TripleOne Somerset's office tenants include AXA Life Insurance, WorleyParsons, Parkway Group, International Air Transport Association and Petra Foods. Healthway Medical Group operates several clinics in the building.
Its retailer tenants include NTUC FairPrice which runs gourmet supermarket FairPrice Finest, Chinese restaurant group Imperial Treasure, Atlas Sound and Vision, and The Orientalist Carpets.
The building has 403 basement carpark lots.
Based on an earlier BT report, TripleOne Somerset generates annual net property income of around $40 million - which would translate to around 4 per cent net yield based on the $970 million.
Talk in the market is that China interests are likely to take part in Mr Pua's consortium. It would also not be surprising if some of Perennial's familiar partners such as George Quek's BreadTalk Group and Ron Sim join forces with Perennial on its latest acquisition.
Mr Pua is also reported to be looking at further asset enhancement for TripleOne Somerset, including converting even more of the office space to higher-yielding retail space. Another possibility would be to lease out more office units as medical suites.
PUBLISHED NOVEMBER 28, 2013
Internet firms drive growth in Grade A space rentals
2014 seen as another healthy year, with steady, sustainable rental growth
Growing demand for Grade A space from consumer Internet companies is setting a new trend in the central business district (CBD), an area traditionally monopolised by financial institutions. These firms are taking up large spaces in prime Grade A buildings at market rates, even as rents inched up this quarter due to healthy demand and no new supply - PHOTO: ST
GROWING demand for Grade A space from consumer Internet companies is setting a new trend in the central business district (CBD), an area traditionally monopolised by financial institutions. These firms are taking up large spaces in prime Grade A buildings at market rates, even as rents inched up this quarter due to healthy demand and no new supply.
Rents at the top-performing sub-market, Marina Bay, were $11.80 per square foot (psf) per month, after inching up 0.85 per cent from Q3's $11.70 psf per month. Elsewhere in the CBD, Raffles Place saw rents increase 0.67 per cent quarter on quarter to $9 psf per month, while Shenton Way's rents increased 0.99 per cent to $8.20 psf per month.
Outside of the CBD, Orchard Road's Grade A rents saw the largest increase, rising 2.2 per cent to $9.20 psf per month. This helped drive overall Grade A rents up 1.1 per cent quarter on quarter to $9.38 psf per month in Q4.
Meanwhile, the average vacancy level for the overall Grade A market fell by 58 basis points to 4.9 per cent as at end 2013. Vacancies in the CBD dropped too - the average rate at Marina Bay dipped by more than one percentage point quarter on quarter to 10.1 per cent, while Raffles Place and Shenton Way ended the year with vacancy rates of 4 per cent and 3.2 per cent respectively.
The drop in vacancies seen in the CBD was in part due to the recent trend of consumer Internet companies taking up large spaces in prime Grade A buildings. New entrant Booking.com, for instance, is set to occupy about 45,000 sq ft at Marina Bay Financial Centre Tower 3. In addition, Google is looking to increase its presence in Asia Square Tower 1, while PayPal has increased its presence at Millenia Tower.
The healthy absorption was also supported by recent transactions such as Mizuho's looking to take up over 100,000 sq ft of space in Asia Square Tower 2, and Rabobank looking to take 26,000 sq ft at South Beach.
On top of healthy absorption, it should be noted that with the delay in completion of Orchard Gateway, Asia Square Tower 2 was the only office building completed in the overall Grade A market in 2013.
Despite being the best performer in terms of absolute rental, the submarket's rental growth has been limited, mainly due to vacant space at the newly completed Asia Square Tower 2, noted Cushman & Wakefield in its latest marketbeat report.
Looking ahead, 2014 should be another healthy year, with steady and sustainable rental growth driven by healthy demand from tenants growing their business, said Toby Dodd, managing director for Cushman & Wakefield Singapore.
Already, some positive momentum has been achieved. At South Beach, over 100,000 sq ft of space is currently under negotiation. That being said, vacancies will be pushed up temporarily, although this is unlikely to pose any risk to the overall rental market recovery, said Mr Dodd.
According to Cushman and Wakefield's estimates, vacancy rates in Raffles Place and the City Hall/Marina Centre area could potentially hit 7.6 per cent in Q4 next year, from 4 per cent and 0.5 per cent currently. This however will likely subside to 4.2 per cent and 0.6 per cent respectively by Q4 2015.
Broadly speaking, rents should increase across all the subsectors in 2014, with rents in Marina Bay potentially hitting $12.30 psf per month, Raffles Place increasing to $9.38 psf per month and Shenton Way hitting $8.52 psf per month by the end of 2014.