CapitaLand, wealth fund tie-up eyes Asia Sq Tower 1

Asia Square Tower 1 (left). PHOTO: ST FILE

A tie-up between Norway's sovereign wealth fund and CapitaLand has emerged as the preferred bidder for BlackRock's Asia Square Tower 1, and will start exclusive talks with the investment management firm, says a Bloomberg report.

However, a deal is not expected to come easy. BlackRock had been seeking about $3,200 per sq ft (psf) of net lettable area or $4 billion, but market watchers suggest the space is not worth more than $2,800 psf or about $3.5 billion.

At the same time, the occupancy rate at the 43-storey tower has weakened since the deal started brewing. This is not for want of trying, as two months' commission is being offered to agents who bring in a tenant, and rents were cut from between $14 psf and $15 psf a month to about $11 psf.

It was only about six months back that Norges Bank Investment Management, which manages the sovereign wealth fund, dedicated some funds for investments in Singapore and Tokyo - prompting BlackRock to put the property on the market, it is believed.

A property consultant said it has received vacancy listings for more than 300,000 sq ft of office space at Asia Square Towers 1 and 2 - which works out to an occupancy rate of less than 85 per cent.

Asia Square Tower 1 has the bulk of office space, or 1.2 million sq ft, while Asia Square Tower 2 - which could be considered for the deal - has about 750,000 sq ft. Google is expected to give up about 130,000 sq ft at Tower 1, while anchor tenant Citigroup may give up a floor or two.

Rennie Whang

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A version of this article appeared in the print edition of The Straits Times on October 14, 2015, with the headline CapitaLand, wealth fund tie-up eyes Asia Sq Tower 1. Subscribe