Record $3,125 psf paid for office building in volatile market

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Published April 29, 2008

Record $3,125 psf paid for office building in volatile market

Commerzbank unit buys 71 Robinson Rd for $743.8m

By ARTHUR SIM


(SINGAPORE) Commerz Real, a fully-owned subsidiary of Germany's Commerzbank, has bought 71 Robinson Road, setting a record in the process and perhaps heralding a new wave of office deals.

The price paid for the building, which was owned by a partnership of Lehman Brothers and Kajima Overseas Asia, was not disclosed by Commerz Real. But sources say it was $3,125 per sq ft of net lettable area (NLA), or $743.8 million. This is 7.7 per cent higher than the $2,900 psf of NLA paid for Hitachi Tower in January.

Lehman/Kajima acquired the building in October 2006 from SingTel for $163.4 million. A year later, the partnership said it would spend about $450 million, including the land cost of $163.4 million, to redevelop 71 Robinson Road into a 280,000 sq ft (gross floor area) building to be completed by mid-2009.

While the selling price represents a healthy capital appreciation, it is understood that the acquisition comes with a coupon payment by Lehman/Kajima to Commerz Real amounting to 4.5 per cent - or about the investment yield for Commerz Real for the duration of construction.

Jones Lang LaSalle (JLL) was appointed by Lehman/ Kajima to market the development in late-2007. JLL managing director (SEA) Chris Fossick said marketing was done globally, with interest from both Singapore and international funds.

In terms of leasing, Mr Fossick said there are no pre-commitments yet but talks are going on with several parties.

Commerz Real was advised by CB Richard Ellis. Commerz Real management board member Hans- Joachim Kuehl said: 'We have seen strong interest from major financial institutions in the development and expect to attract rents in the region of $15 psf.'

The acquisition was made by Commerz Real's real estate fund hausInvest global which also owns 78 Shenton Way, bought in December 2007 for $650 million or $1,857 psf of NLA.

It is worth noting that 78 Shenton Way was sold by a joint venture between Credit Suisse and CLSA funds after they paid $348.5 million for it earlier in the same year.

JLL's Mr Fossick believes this year could see more such assets held by opportunistic funds go to core funds like Commerz Real.

By his reckoning, 2007 saw core funds acquire at least 10 office assets held by opportunistic funds. Larger deals include that by CLSA, which sold the SIA Building to German pension fund SEB.

Mr Fossick believes at least another 13 office assets could be targets for core funds, including DBS Towers 1 and 2. 'We could look back on 2008 and still see quite a lot of transactions despite the global credit crunch,' he said.


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http://www.straitstimes.com/Money/St...ry_232187.html

April 29, 2008

German fund pays $744m for S'pore office block

By Joyce Teo, Property Correspondent

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RECORD HIGH: The price paid for the Robinson Road building, due to be completed next year, translates to a high of $3,125 psf. -- PHOTO: KAJIMA OVERSEAS ASIA AND LEHMAN BROTHERS

THE residential property sector may be cooling but the office sector is still relatively hot.

United States investment bank Lehman Brothers and the regional arm of Japan-based Kajima have just sold an office building development at 71 Robinson Road to a German buyer.

The price was a hefty $743.75 million, sources say, though the sum was not officially disclosed.

In October 2006, they had paid just $163.4 million for the site. Last September, the pair said they would spend about $450 million to develop it.

Kajima will complete the building as the contractor before it is delivered to the buyer, German real estate asset manager Commerz Real's real estate fund hausInvest global.

The fully-owned unit of Commerzbank said yesterday that it is buying the site for an undisclosed sum from the partnership of Kajima Overseas Asia and Lehman Brothers. It said it wants to ride on the ongoing growth in Singapore's office sector.

The fund's price translates to a record $3,125 per sq ft (psf), based on 238,000 sq ft of net lettable area. The nearby Hitachi Tower was sold early this year for $811 million or $2,901 psf.

The 15-storey top grade building, in the Central Business District, has a gross floor area of 280,000 sq ft and is due to be completed in the second half of next year.

Jones Lang LaSalle said they had embarked on a global marketing campaign after the sellers appointed them to look for a buyer late last year.

There were other contenders, said its managing director for Singapore and South-east Asia, Mr Chris Fossick. He said they are now in serious talks with a number of parties wishing to lease space in the building.

'There is keen interest in the Singapore office market, particularly from international investment funds which take a medium to long-term view of the market,' said Mr Fossick.

Commerz Real management board member Hans-Joachim Kuehl said they expect to attract rents of about $15 psf.

Commerz Real, which was advised by CB Richard Ellis, is no stranger to the office market in Singapore. Late last year, the same fund hausInvest global bought 78 Shenton Way for $650 million, or $1,857 psf.