Thursday, December 23, 2010

Capital Square may be put on the market soon

Business Times: Thu, Dec 23
CAPITAL Square, a Grade A office development at Church Street in the Raffles Place micromarket, is expected to be put up for sale soon. It could be worth about $900 million.


BT understands that Cushman & Wakefield will be appointed as marketing agent for the property. It was one of about four or five property consultants invited to make submissions under a Request for Proposal recently.


The property has a net lettable area of 386,525 sq ft, comprising a 16-storey office tower, two rows of conservation shophouses and over 360 car park lots. It is on a site with a remaining lease of about 84 years.


Capital Square is owned by Germany's Ergo Insurance Group and managed by MEAG Pacific Star Asset Management, a joint venture between Pacific Star Group and MEAG, which is asset manager of Munich Re and Ergo.


The building was developed by Keppel Land and Rodamco. The duo sold the property around late 2002 in a deal that valued the asset at $490 million to Ergo. That transaction was structured as an asset securitisation which raised $505 million through the issue of seven-year bonds. Market watchers recall that ahead of the bonds' maturity, Ergo had mulled a sale of the asset last year, but in the end opted for a $549 million refinancing deal which involved the issuance of notes arranged by Australia and New Zealand Banking Group.


BT understands that Cushman could be planning a tender or expression of interest exercise for the sale of Capital Square next month with a view to concluding a deal by April 2011.


Some industry players suggest that Capital Square, which was completed in 1998, could fetch about $2,300-2,400 per square foot, or about $889-928 million. They based this on the $2,400 psf achieved (excluding income support) for K-Reit Asia's and Suntec Reit's recent purchases of a one-third stake each in Marina Bay Financial Centre's Phase 1 (comprising two Grade A office towers, Marina Bay Link Mall and over 600 carpark lots).


'However, MBFC is a brand new development while Capital Square is 12 years old. There may also be space coming up for re-leasing from next year when some tenants move out,' points out one property consultant.


Major tenants at Capital Square include Citigroup, Morgan Stanley and Bloomberg. It boasts column-free floor plates of up to 30,000 sq ft for the office tower, among the biggest in the location.


'This is one of the better-quality office buildings in the Raffles Place area. The landlord could probably charge rentals today above $10 psf a month,' said an office leasing agent.


So far this year, about $8.8 billion worth of office investment sales deals have been done.


Besides K-Reit's and Suntec Reit's acquisitions of a one-third stake each in MBFC Phase 1, other major deals include DBS Towers ($870.5 million), Chevron House ($547.1 million) and GuocoLand's purchase of the site above Tanjong Pagar MRT Station with a minimum office component.

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