Qatari Fund Buys $2.5 Billion Singapore Tower From BlackRockby and
Asia Square sale is biggest office deal in the city state
Largest single-tower property transaction in Asia-Pacific
Qatar Investment Authority, the sovereign wealth fund of the Middle Eastern country, agreed to buy BlackRock Inc.’s Asia Square Tower 1 for S$3.4 billion ($2.5 billion) in the biggest office transaction in Singapore.
Qatar will purchase the office tower in the central business district in the largest single-tower sale in the region, according to a joint statement from Qatar Investment Authority and BlackRock Monday. The building has been on the market since last year after bids by a consortium of Norway’s sovereign wealth fund and CapitaLand Ltd., Singapore’s largest developer, and rival bids by ARA Asset Management Ltd. failed to clinch the deal.
BlackRock, the world’s largest asset manager, had to settle for a lower price than it had originally anticipated for the 43-story tower, whose tenants include Citigroup Inc. and KKR & Co., as rents in the city state decline amid slowing economic growth and increased supply. BlackRock said last year that it could get more than S$4 billion for Asia Square Tower 1 and may also sell Asia Square Tower 2. The two towers together are worth S$7 billion, the firm estimated at the time.
“There has been a lot of near-term negativity on the Singapore market,” John Saunders, head of Asia-Pacific for BlackRock Real Estate, said in a phone interview. “I think it’s a little bit overdone. There is some new stock coming on, but what tends to happen in Singapore is you get a big piece of supply that temporarily can disrupt the market, but then demand is always usually pretty strong.”
Both the Asia Square towers are 90 percent occupied and vacancies in the area are below 4 percent, Saunders said.
Qatar will add Asia Square to a real estate portfolio that also includes four Los Angeles office buildings acquired earlier this year with real estate investment trust Douglas Emmett Inc. for $1.34 billion, London’s Canary Wharf Group and parent Songbird Estates Plc. In 2015, Qatar was the second-biggest foreign purchaser of U.S. offices, following its investment in Brookfield Property Partners LP’s $8.6 billion Manhattan West project.
The QIA, as the wealth fund is known, has invested about $38 billion in property around the world, with $21.7 billion in office transactions and $7.5 billion for hotels, including the 2014 purchase of the St. Regis Rome, according to Real Capital Analytics Inc. The fund may buy the luxury St. Regis hotels in New York and San Francisco from Starwood Hotels & Resorts Worldwide Inc., people with knowledge of the matter said in May.
About $100 billion of the Qatar Investment Authority’s stakes in local companies such as Qatar Airways and Qatar National Bank SAQ will be placed into a new internal division named Qatar Investments, people with knowledge of the matter said last month. The move is of the biggest overhaul of the way the fund is run since royal family member Sheikh Abdulla bin Mohamed bin Saud Al Thani was appointed chief executive officer in 2014.
Rents to Drop
Office leases in Singapore are forecast to decline as much as 25 percent in a prolonged slump that may last until the end of 2018 as demand slows, Daiwa Securities Co. said in March. The average monthly gross rent in the central business district declined 4.4 percent to S$9.06 a square foot per month in the quarter ended March from the previous quarter, according to Jones Lang LaSalle Inc.
Singapore has had a couple of office building sales over the past month even as rents are under pressure and there is a large supply outstripping demand for prime space in the city-state.
CapitaLand Commercial Trust, Singapore’s largest office real estate investment trust by value, agreed to buy the remaining 60 percent stake in CapitaGreen in the city-state’s business district for S$393 million from its partners last month. MYP Ltd., which operates an investment holding company for properties and provides warehousing and logistics services, offered S$560 million for the Straits Trading Building, a Grade A office tower also in the business district, the company said last week.
Asia Square is owned by MGPA, which was acquired by BlackRock in 2013. MGPA developed the towers on two adjoining plots it won in 2007 at government land auctions. Tower 1 has an occupancy rate of 91 percent, according to Cushman & Wakefield Inc. Google Inc., one of the tenants, plans to relocate to a business park outside the main business district after its lease ends this year, the broker said.
Jones Lang LaSalle and CBRE Group Inc. were joint advisers to BlackRock for the Asia Square Tower 1 transaction, according to the statement.