Tag Archives: Investment Sales

Property investment sales surge to 3-year high

It’s been a banner year for big-ticket property transactions of at least S$10 million each.

As at Dec 23, the tally stood at S$22.5 billion – up 31 per cent from 2015′s S$17.2 billion, going by Savills Singapore’s figures.

CBRE and Cushman & Wakefield have similar numbers.

This year’s tally of property investment sales, as these transactions are also known, is the highest in three years and has been supported by two mega deals – BlackRock’s S$3.38 billion sale of Asia Square Tower 1 to Qatar Investment Authority and the government’s S$2.57 billion sale of a white site slated for mostly office use along Central Boulevard to a unit of IOI Properties Group.

CBRE’s data points to S$10.1 billion of office investment sales deals this year (up to Dec 20).

This gave the sector the lion’s share or 44 per cent of overall investment sales.

This was followed by the residential segment, accounting for 33 per cent or S$7.5 billion worth of transactions (supported by the Shunfu Ville and Raintree Gardens collective sales and City Developments’ profit participation securities transaction of the completed Nouvel 18 condo).

“With some key major deals out of the way in 2016, the pipeline for 2017 seems to be a shade lesser,” commented CBRE Research’s head of Singapore and South-East Asia Desmond Sim.

Property pundits say next year’s pipeline of big transactions includes Jurong Point mall and Asia Square Tower 2, each expected to fetch around S$2 billion.

The office and residential sectors will remain key drivers and analysts generally expect the overall investment sales next year to remain in the region of 2016′s level or to soften, citing the rising interest-rate environment and slowing trade in Asia if incoming US president Donald Trump fulfils his promise of pursuing a protectionist stance.

However, Colliers International managing director of Asia capital markets and investment services Terence Tang hazards a guess that 2017′s investment sales will be similar to 2016′s or possibly 10 per cent higher. “Residential will account for a bigger proportion of deals in 2017 than office – the reverse of what we have seen this year – driven by developers’ voracious appetite for replenishment land via both state land tenders and private-sector collective sales.”

Moreover, says Savills Singapore’s managing director and head of investment and residential services Steven Ming, residential developers that face looming sales deadlines stipulated under the government’s Qualifying Certificate conditions will be motivated to divest their unsold inventory through bulk sales of units or structured deals for their projects – to avoid paying hefty penalties to the state.

“Investing in high-end residential properties remains appealing given the probability of investing at below replacement cost,” he noted.

Meanwhile, Colliers’ Mr Tang said the Singapore office sector remains on the maps of global and regional investors because of the high quality of buildings completed over the past decade and the covenant strength of tenants in these developments.

However, further interest-rate hikes are on the cards while office rents and occupancies will continue to come under pressure next year.

“So investors will demand higher yields – but owners may not be willing to let go of their assets at lower prices, at least in the near term,” said Mr Tang.

Cushman & Wakefield Singapore research director Christine Li observes that this mismatch in pricing and yield expectations between buyers and sellers was already evident in office deals this year.

Private-equity funds, which had been the more active buyers of commercial property in the past, took a backseat as a result. “Instead, non-traditional buyers such as the ultra high net worth families and sovereign wealth funds (SWFs) led the buying this year.”

In a similar vein, Savills’s Mr Ming predicts that SWFs and insurance companies are likely to dominate big-ticket office purchases in the next 12 months. “This is because of the expected protracted compressed yield environment which makes them more competitive investors given their lower capital costs, and the continued attraction of Singapore as one of Asia’s safe harbour markets to be invested in.”

As office rents generally are expected to continue softening in 2017 as the sector faces the brunt of an oversupply and a weakened economic outlook, this could draw new capital into the sector in anticipation of lower prices.

“But the resultant intensified buying competition amid a finite saleable inventory will likely keep capital values stable,” suggests Mr Ming.

Both CBRE and Savills expect total investment sales in 2017 to be in the S$18-S$20 billion region – down from this year’s high base, marked by mega deals.

Ms Li of Cushman said the figure could remain in the S$20 billion range.

Mr Tang highlighted that the Chinese government’s general policy to discourage outflow of capital to stem a further fall in the yuan may slow Chinese investment into Singapore real estate.

Further interest-rate hikes are also seen as a dampener on property deals in 2017, which may result in some investors adopting a wait-and-see position, especially if they wish to first see whether Mr Trump will actually implement the protectionist policies he championed during his election campaign.

On the flip side, argues Mr Tang, “Mr Trump’s policies are also expected to create a more inflationary environment – during which typically, people tend to go into real estate for a hedge”.

A weakening Singapore dollar is also expected to attract foreign investors to Singapore properties.

CBRE’s data compiled on Dec 20 showed that so far this year, investment sales of office properties have more than doubled to S$10.1 billion from S$4.2 billion last year.

Residential property deals have expanded 42.7 per cent to S$7.5 billion from S$5.2 billion. Investment sales of industrial property have also climbed 42.8 per cent to S$2.7 billion from S$1.9 billion previously.

On the whole, investment sales that originated from the public sector have dipped 0.7 per cent to S$5.8 billion this year while transactions originating from the private sector have risen 41 per cent to S$17.1 billion, going by CBRE figures.

As a result, the public sector’s share slipped to 25.4 per cent in 2016 from 32.5 per cent last year.

“This was due to a cutback in Government Land Sales sites,” said Mr Sim.

Equity Plaza sold for S$550m to consortium led by GSH Corp

Equity Plaza, a 28-storey office tower in Singapore’s central business district (CBD), has been sold for S$550 million to a consortium led by mainboard-listed GSH Corp.

Real estate consultancy CBRE, which brokered the sale, said the price works out S$2,181 per square foot (psf) based on the building’s current net lettable area of about 252,135 square feet.

Keppel Land was the seller of the property. GSH said it intends to retrofit Equity Plaza, which is 22 years old, to get it on par with newer buildings in the area.

“The subsequent investment to upgrade the facade and overall quality of the building will position the group to realise substantial value from the acquisition in the near future,” GSH CEO Gilbert Ee said.

Mr Jeremy Lake, CBRE’s executive director for investment properties, said the sale of Equity Plaza reflects continued interest in Singapore’s office market.

Just last month, Prudential Tower, another building in the CBD, was sold for S$512 million, or approximately S$2,316 psf.

Source : Channel NewsAsia – 25 Jun 2014

Asia-Pacific commercial property investments up

Commercial real-estate investment volumes in the Asia-Pacific increased by 8 per cent in the third quarter of this year to US$29.6 billion ($38.4 billion), according to DTZ Research.

The real-estate research house said that volume growth would remain strong for the remainder of this year – and into next year, with investment predicted to hit US$145 billion next year. That would be a 12-per-cent increase on the expected volume of US$129 billion for the whole of this year.

The established markets of Australia and Hong Kong both recorded 40 per cent jumps in third quarter investment – to US$4.3 billion and US$1.7 billion, respectively.

Volumes in Japan also increased 25 per cent quarter-on-quarter to US$4.7 billion.

Meanwhile, investment volumes in Malaysia reached a record high of US$1.9 billion in the third quarter, representing a 233-per-cent improvement from the second quarter. The growth was led by large acquisitions of retail property assets by domestic real estate investment trusts.

In Singapore, volumes surpassed the US$3 billion mark last seen in 2008 as the world’s fastest-growing economy boosted investor confidence.

The Chinese market, however, registered a 21-per-cent decline from the previous three months to US$11.9 billion because of the steps taken by Beijing to curb property market excesses in the country.

However, China still remains the most liquid market in the Asia-Pacific region, accounting for 40 per cent of overall activity in the third quarter.

Mr David Green-Morgan, head of DTZ Asia Pacific Research, is optimistic about the outlook for Asia-Pacific property investments, with capital and rental values predicted to increase across almost all markets next year.

He said he expected institutional investors, especially sovereign wealth funds and pension funds, to become increasingly active in the region’s property markets.

Source : Today – 22 Oct 2010

$362b for global commercial property

About US$280 billion ($362 billion) of capital will be available to invest in global commercial real estate next year, with the United States market drawing the most buying interest as it bottoms out, according to property consultant DTZ

DTZ said the estimated available capital for 2011 would be 22 per cent up on a forecast it made in December, with US$97.4 billion (up 54 per cent) for the US; US$111.8 billion (flat) for Europe, the Middle East and Africa; and US$71.4 billion (up 29 per cent) for the Asia-Pacific region.

“The current attractiveness of the US is in stark contrast to the situation a year ago. Most US markets were cold, offering expected returns below risk-adjusted required returns,” said Mr Nigel Almond, DTZ’s associate director of forecasting and strategy.

“This opportunity remains largely unexploited to date, since transaction volumes in the US have not yet seen the levels witnessed in Europe and Asia Pacific,” he said.

The shift in interest follows an earlier report by DTZ, which found prime commercial property in the US and Asia-Pacific was more attractively priced on a five-year horizon than in Europe.

Listed property companies, many having raised capital to repair their balance sheets during the global financial crisis, are back on the market, equating to 17 per cent of investors, up from 4 per cent in the end-2009 estimate, DTZ said.

The amount of capital targeting assets in a single country is also significantly higher, again due to heightened interest in the US, where some analysts predict the hard-hit office market has hit a bottom.

The proportion of capital eyeing single countries next year rose to 44 per cent, from 30 per cent at end-2009, with about half of those funds looking at the US alone, DTZ said.

Source : Today – 15 Oct 2010

Raffles Place’s Chevron House sold for $547m

Chevron House at Raffles Place has been sold for $547 million to a fund management Deka Immobilien of Germany, taking the total value of Singapore office investment sales deals this year to around $3 billion.

The price works out to around $2,083 per square foot based on the net lettable area (NLA) of 262,650 sq ft.

Formerly known as Caltex House, Chevron House is a 33-storey building on a site with a remaining lease of about 78 years.

The property is being sold by Goldman Sachs funds who paid $730 million or about $2,780 psf for the property in 2007. That acquisition was funded mostly by a consortium of lenders headed by Standard Chartered. The latest transaction is slated for completion by late October, ahead of the expiry of the financing facility, sources say.

The Singapore office market has seen a steady rental recovery after the global financial crash.

‘The fundamentals are attractive. Investors have realised this over the past three months and investor appetite has increased significantly. Parties looking to invest include Reits, other property funds and private investors. Appetites range from $100 million to $500 million-plus,’ said a market watcher.

Deka, the buyer, is a unit of DekaBank in Germany. This is Deka’s first major property acquisition in Singapore and is said to be at close to 4 per cent net yield. Chevron House is currently 98% occupied. Major tenants include Chevron and Visa.

The property consists a four-storey retail podium, 29-storey office tower and three basement levels. B1 has retail shops linked to the Raffles Place MRT Station, while B2 and B3 contain 96 carpark lots.