CFA Society Singapore
SINGAPORE (Sept 21): CapitaLand Commercial Trust is buying Asia Square Tower 2 from American asset manager BlackRock Inc for a total of $2.15 billion.
The agreed value for the 46-storey Grade A office building, located in Singapore’s Marina Bay financial district, is at $2.09 billion, or $2,689 psf.
CCT says it plans to fund the acquisition, which will be one of Singapore’s largest real estate deals this year, via a rights issue and bank loans.
Some 513.5 million rights units will be issued based on the issue price of $1.363 per rights unit to raise gross proceeds of nearly $700 million. The issue price is at a discount of 19.6% to the stock’s closing price of $1.695 per unit on Wednesday.
The deal will also be partially financed through proceeds of $340.1 million from the divestments of Golden Shoe Car Park, Wilkie Edge, and a 50% stake in One George Street.
Asia Square Tower 2 has a combined net lettable area NLA) of 778,719 sq ft, comprising office and retail units.
CCT says it expects the net property income (NPI) yield to be 3.6% per annum, based on a committed occupancy rate of 88.7% as at end-June.
“We seized the opportunity to acquire a premium Grade A property at an attractive price and entry yield,” says Lynette Leong, chief executive officer of CCT’s manager.
“Market statistics have shown that Singapore’s office market rents have reached a trough; hence, the acquisition will position CCT to benefit from the expected market uptick in Grade A office rents,” she adds.
Post-acquisition, CCT’s portfolio value will increase from $8.0 billion to $10.1 billion.
According to real estate consultancy CBRE, rental income from premium office spaces in Singapore showed signs of improvement in the second quarter, following declines in eight consecutive quarters.
“Prior fears around a supply overhang have also diminished as the new developments have been able to attract tenants," it says.
While economic indicators have firmed in recent months, CBRE adds that might take some time before a return to strong demand in office rental.
BlackRock last year sold Asia Square Tower 1 to sovereign wealth fund Qatar Investment Authority for $3.4 billion.
CCT called for a trading halt before market open on Thursday.
Units of CCT closed at $1.70 on Wednesday.