SINGAPORE (Bloomberg) - Keppel Land's investment company is planning to sell its 50 per cent stake in Capital Square, a 16-storey building in Singapore's financial district, according to people familiar with the proposal.
Keppel's Alpha Investment Partners will start to seek buyers for the approximately 340,000-square-foot property, said the people, who asked not to be identified because the information is private.
The planned sale comes after office rents in the city's central business district jumped 14 per cent last year, the biggest increase in Asia, while luxury home prices slumped 6 percent, the most in the region, according to property broker Jones Lang LaSalle. An expected recovery in high-end housing has drawn investors including Blackstone Group.
"Alpha would make a good return considering office rentals are up 20 per cent to 30 per cent since 2011 when Alpha bought the stake, and capital values would have risen about 20 per cent," said Donald Han, Singapore-based managing director at real estate broker Chestertons.
Alpha bought the property with insurer NTUC Income in 2011 from Munich Re for $889 million. That works out to about S$2,300 per square foot. Han estimates that Alpha could probably fetch as much as S$2,800 psf, valuing the 50 per cent stake at about $500 million.
Tenants at the building, which includes two rows of heritage shophouses, include the local offices of Morgan Stanley, Citigroup and Bloomberg, Keppel Land said in an earlier statement.
"There would be announcements made as and when such transactions take place," the seller said in an e-mailed response to queries.
Keppel Land and its related companies have been active in the Singapore office market in the past year. Keppel REIT, the second-biggest office property trust in Asia excluding Japan, bought Keppel Land's one-third stake in the downtown Marina Bay Financial Centre Tower 3 after selling older assets including the 30-story Prudential Tower.
The city's prime office rents are set to extend gains this year with a limited number of new commercial properties, Lynette Leong, chief executive officer of CapitaCommercial Trust, said in an interview earlier this year.
Grade-A office rents may climb 11 per cent this year as a dearth of supply until mid-2016 helps boost leases, Alan Cheong, a Singapore-based director at broker Savills Plc, said earlier this year.