DBS buys stake in Marina Bay tower for $1b

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DBS buys stake in Marina Bay tower for $1b

Bank now has 30% of consortium that owns site of new headquarters

Published on Dec 11, 2012

By Melissa Tan


DBS Group Holdings is paying $1.035 billion for a stake in Marina Bay Financial Centre (MBFC) Tower 3, the site of its new headquarters.

The move will help the bank cut its rental costs and place DBS in the heart of Singapore's new financial district.

The bank told the Singapore Exchange yesterday that it has bought 30 per cent of Central Boulevard Development, a consortium that owns Tower 3.

The deal means DBS will now receive dividend income to help offset the rental expense.

DBS chief executive Piyush Gupta said: "The decision... enables us to better manage our occupancy costs in the long term."

Tower 3 has 46 storeys with about 1.35 million sq ft of prime Grade A office space. DBS is the anchor tenant, having completed its move there in October. It occupies 18 floors, or more than 600,000 sq ft.

This transaction marks DBS' return to owning its premises. It was leasing its previous headquarters in Shenton Way after selling the two towers to a Goldman Sachs real estate fund for $690 million in November 2005.

Overseas Union Enterprise paid $870.5 million to buy the towers in August 2010.

A Savills Singapore valuation report last month valued one-third of Tower 3 at around $1.137 billion.

Analysts said the price DBS is paying - it translates to about $2,555 per sq ft (psf) - looks a good deal.

It is lower than the $2,800 psf to $3,000 psf price range that newer prime office space commands, noted Knight Frank research head Png Poh Soon.

"Given the amount of stake that DBS is taking at $1.035 billion, which is quite a hefty amount and limited to few players in the market, the price secured is at an attractive rate," he noted.

"The opportunity to own a stake of the super prime grade office space is quite attractive for DBS, which is in a strong liquidity position."

Mr Nicholas Mak, head of research at property consultancy SLP International, said the DBS purchase comes at a time when its cost of funding is extremely low, given that interest rates are near rock-bottom.

MBFC, which was built for $4 billion by Cheung Kong/Hutchison Whampoa, Keppel Land and Hongkong Land, comprises three office towers, two residential towers and a subterranean retail mall.

DBS is buying the Tower 3 stake from Choicewide Group, which is a joint venture of Hong Kong's Cheung Kong and Hutchison Whampoa.

It also has the option to buy Choicewide's remaining 3.3 per cent stake in the tower for an estimated $115 million.

Meanwhile, DBS said yesterday that it will add 10 bankers to its 50-person team serving companies in Hong Kong and China, where it sees good growth opportunities.

Ms Ginger Cheng, DBS' head of institutional banking for large companies in Hong Kong and China, told a briefing yesterday that the bank plans to set up a team next year to provide financing and cash management services to multinationals in Europe and the United States.

DBS shares rose one cent to $14.80 yesterday.

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Published December 11, 2012

DBS spending $1b for stake in new home

It's buying 30% stake in MBFC Tower 3 to help it manage its occupancy costs better

By Siow Li Sen


[SINGAPORE] DBS Group Holdings is buying a 30 per cent stake in the building which houses its headquarters for over $1 billion to help manage its rental cost.

In a statement yesterday, the bank said it is buying the 30 per cent interest in Marina Bay Financial Centre Tower 3 from a joint venture of Hong Kong's Hutchison Whampoa and Cheung Kong groups for $1.035 billion. The Hong Kong companies are controlled by Li Ka Shing, Asia's richest man.

MBFC Tower 3 is an award-winning 46-storey international Grade A office building with about 1.35 million square feet of net lettable area. DBS is the anchor tenant, occupying more than 600,000 sq ft across 18 floors.

It was in October that the bank moved to MBFC Tower 3, which houses DBS headquarters, its innovative flagship branch, a state-of-the-art dealing room, and some 4,800 employees.

The building is owned by Central Boulevard Development Pte Ltd (CBDPL), a private company which is owned in equal one-third shares by the vendor, an indirect unit of Hongkong Land and a subsidiary of Keppel Land Properties Pte Ltd, the statement said.

The deal is structured as a purchase from the vendor of the 30 per cent equity stake and its associated shareholder's loan, for about $1.035 billion.

Both parties also entered into a conditional put option agreement for DBS to take up the vendor's remaining 3.33 per cent equity stake in CBDPL and its associated loan, for an estimated $115 million.

DBS, which will pay for the stake in cash from internal funds, expects the acquisition to be completed by year-end.

Property consultants wonder at DBS taking a minority stake in the building.

They also note that in 2010, Cheung Kong and Hutchison Whampoa sold their one-third interest in Phase One of MBFC to related Suntec Real Estate Investment Trust while K-Reit bought parent Keppel Land's stake. Phase One consists of MBFC Towers 1 and 2.

The consultants said the price paid by DBS, estimated at $2,555 per sq ft of net lettable area, looks fully valued.

Grade A office average rent, which fell 13.5 per cent this year as more top- quality buildings were completed, is expected to stabilise in 2013, according to CBRE data.

DBS chief executive Piyush Gupta said "the decision to acquire a stake in our new headquarters in MBFC Tower 3 enables us to better manage our occupancy costs in the long term".

Taking a stake in the building makes no difference to the rent DBS has to pay but it helps to offset the rental expense as the bank can benefit from equity accounting of an associate.

"Structurally, it helps DBS manage the rental cost. The rent is offset by the earnings you get," said Michael Sia, DBS head of investor relations.

DBS said that independent property valuer Savills, in a report dated Nov 1, stated that the market value of a one-third undivided interest in MBFC Tower 3, subject to existing and proposed tenancies, was about $1.137 billion.

DBS also said Danny Teoh Leong Kay, an independent director of DBS, is also a director of Keppel Corporation Ltd, which has an interest in the deal through Keppel Land Properties Pte Ltd.

Accordingly, Mr Teoh has abstained (and will continue to do so) from all deliberations and voting on all board resolutions relating to the acquisition.