A firm owned by Ascendas Land (Singapore) is buying the CPF Building for $550 million, slightly above expectations, as it garners its first office asset in Singapore.
Southernwood Property submitted the highest bid in the tender, which closed on Oct 28, the Central Provident Fund (CPF) Board said yesterday.
The tender attracted three bids. Leapford, which is wholly owned by Pacific Century Regional Developments, submitted a $538.28 million bid, while OUE Reef Development put in $280 million.
Analysts said earlier that they expected the building to fetch about $450 million.
Ascendas plans to redevelop the property into a grade-A office building with supporting retail elements, president and group chief executive Manohar Khiatani told The Straits Times yesterday.
The latest acquisition builds on its regional office portfolio, which includes assets in Shanghai and Seoul, and will complement its business park offerings here, he added.
The building's net lettable area is about 324,000 sq ft. A new project could have a gross floor area of up to about 606,000 sq ft.
This makes the sale price reasonable as long as there is some inflation and rents go up, said Savills Singapore research head Alan Cheong. If redevelopment occurs soon, the new project could come up after 2020, with expected rents of about $9 to $10 per sq ft per month.
"Even though the lease is short, there will still be a return, and an added bonus if Ascendas is able to top up the lease in 10 or 20 years' time," Mr Cheong said. The building has a balance lease of 51 years.
Even though the sale price is quite bullish, there is cause to be optimistic about the area, which tends to meet the requirements of many smaller and medium-sized businesses keen on a central location, noted R'ST Research director Ong Kah Seng.
The Government rarely sells its buildings. One in recent memory is the current AXA Tower, just across the road from the CPF Building. Originally the Treasury Building, it was renamed Temasek Tower when the Ministry of Finance moved out in 1997. A CapitaLand subsidiary sold the property for $1.04 billion in 2007, noted SLP International executive director Nicholas Mak.
The CPF Service Centre will continue to operate at its Robinson Road premises until further notice.