Capitaland Commercial Trust buys Asia Square Tower 2 for $2.09b

The deal for Asia Square Tower 2 comes a little more than a year after BlackRock sold the larger Tower 1 to Qatar Investment Authority for S$3.4 billion. PHOTO: CapitaLand Commercial Trust

SINGAPORE - CapitaLand Commercial Trust (CCT) is acquiring Asia Square Tower 2 in Marina Bay from US private equity giant BlackRock for S$2.09 billion or S$2,689 per square foot.

The sale of Asia Square Tower 2 is the latest in recent blockbuster deals in Singapore's office market and comes a little more than a year after BlackRock sold the larger Tower 1 to Qatar Investment Authority for S$3.4 billion, or S$2,667.5 psf. It was then a record office transaction in both dollar amount and square footage.

Malaysian developer IOI Properties in November last year paid S$2.6 billion for a prime government land sale site at Central Boulevard, also in Marina Bay, while FWD Group, an insurance company backed by Hong Kong billionaire Richard Li, in May bought a 50 per cent stake in One George Street CCT for S$592 million.

Jeremy Lake, executive director of capital markets at CBRE, said the Asia Square Tower 2 deal "provides another pricing benchmark which reconfirms that the recovery in office rents and prices is well underway." CBRE was one of the advisers to BlackRock in the transaction.

CCT said in a media release on Thursday (Sept 21) it will fund its mega purchase through a combination of a fully-underwritten and renounceable 166 for 1,000 rights issue to raise gross proceeds of approximately S$700 million, external bank borrowings of S$1.12 billion, and proceeds of approximately S$340.1 million from the divestments of a 50-per cent stake in One George Street, Golden Shoe Car Park and Wilkie Edge.

It expects net property income (NPI) yield of 3.6 per cent per annum, based on a committed occupancy rate of 88.7 per cent as at June 30, 2017.

Located in the heart of Marina Bay, Asia Square Tower 2 is a 46-storey integrated commercial development comprising a premium quality Grade A office building and amenities including The Westin Singapore and a two-storey retail podium.

Completed in September 2013, the office and retail units in Asia Square Tower 2 have a combined net lettable area (NLA) of 778,719 square feet.

Mr Soo Kok Leng, chairman of the trust's manager, said, "The addition of Asia Square Tower 2 is a strategic move that is in line with our portfolio reconstitution strategy to rejuvenate CCT's portfolio with the addition of newer and higher yielding Grade A assets.

"With this acquisition, CCT is now well anchored in all the key sub-markets in Singapore's Central Business District: Marina Bay, Raffles Place, Tanjong Pagar and City Hall; cementing its position as the largest landlord of prime office assets in Singapore."

Asia Square Tower 2 enlarges CCT's attributable office NLA to 3.5 million sq ft.

"This enhanced office portfolio places us in a strong position to generate respectable returns for unitholders over the long term," said Mr Soo.

Ms Lynette Leong, chief executive officer of the manager, said: "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. Given our track record of successful leasing strategies, we will be able to capture further rental income upside from increasing the property's 88.7 per cent occupancy in a rising market."

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