Friday, March 18, 2011

Alpha, Income closing in on Capital Square

(SINGAPORE) A mega office transaction is expected to be sealed soon. A joint venture between NTUC Income and a fund managed by Alpha Investment Partners is said to be doing due diligence to purchase Capital Square. Alpha is the property fund management arm of Keppel Land.

A deal could be struck as early as next week and market watchers tipped the price to be in the region of $2,300-2,400 per square foot on net lettable area - or about $889-927 million.

Still, it would be the biggest office deal so far this year. In January, Income took a 49 per cent equity stake in the company holding 16 Collyer Quay, formerly known as Hitachi Tower. That deal valued the 999-year leasehold office building at about $626 million or $2,250 psf.

Capital Square, a 12-year-old development at Church Street in the Raffles Place office micro-market, is being sold by Munich Re and Ergo.

Cushman & Wakefield, the sole marketing agent for Capital Square, declined to comment.

The property was marketed through an expression of interest exercise, the first stage of which closed on Feb 18 and attracting about 10 bidders. Of these, a handful are said to have been shortlisted for the second stage of bidding, which closed the following week. After that, the Alpha-Income tie-up was selected to enter due diligence under an exclusive dealing period.

Analysts expect Capital Square's price to be at a discount to the $2,400 psf (excluding income support) that Suntec Reit and K-Reit Asia last year paid for their respective one-third stakes in the first phase of Marina Bay Financial Centre (MBFC) - given that MBFC is a spanking new office development in a premier location on a site with a remaining lease of about 93 years.

Capital Square, which was completed in 1998, stands on a site with a balance lease of about 84 years.

It has a total net lettable area of 386,525 sq ft comprising a 16-storey office tower (about 339,000 sq ft) with floor plates averaging about 30,000 sq ft, and two rows of conservation shophouses (around 38,000 sq ft of boutique offices and 9,600 sq ft shop space).

Tenants include Morgan Stanley, Bloomberg, Aberdeen Asset Management and Citibank.

Capital Square is managed by MEAG Pacific Star Asset Management, a tie-up between MEAG (the asset manager of Munich Re and Ergo from Germany) and Pacific Star.

Other office deals concluded this year include the freehold Singapore Technologies Building in Tanjong Pagar, which was sold to Resorts World Sentosa (S) Pte Ltd for $146 million or $1,492 psf on current net lettable area. Jones Lang LaSalle brokered the sale of the 13-storey office block.

Meanwhile, CLSA Capital Partners is understood to be the buyer of PoMo, on Selegie Road, which was sold earlier this week by Lend Lease and Silverpeak Real Estate Partners for $255 million or $1,400 psf on NLA.

PoMo, formerly known as Paradiz Centre, has four levels of retail space and six levels of offices. It is on a site with about 71 years' remaining lease. The deal was also brokered by JLL.

Lend Lease's acquisition of the asset for $138 million from LC Development and Singapore Pools was announced in 2006.

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