Qatar sovereign wealth fund close to buying Asia Square Tower 1 for $3.5 billion

Qatar sovereign wealth fund close to buying Asia Square Tower 1 for $3.5 billion

Qatar Investment Authority (QIA) is said to be on the brink of sealing a deal to buy Asia Square Tower 1 from BlackRock. The price is expected to be about S$2,700 per square foot of net lettable area (NLA) or S$3.5 billion.

The lump sum price will set a fresh record for an investment sale of a piece of Singapore real estate; it will also be the largest transaction in the Asia-Pacific of a single office asset in the past five years.

A deal on this Marina View property is expected by this weekend.

The price translates to a net yield of about 3.2 per cent, based on the 43-storey tower's current occupancy, which stands at 83 per cent. Asia Square Tower 1 has 1.287 million sq ft of NLA, including about 39,220 sq ft of retail space.

The retail area is on the first two levels; carpark lots take up levels three to five. The offices take up levels six through 43, with tenants including Citi, Julius Baer, Marsh and Google. Google occupies about 130,000 sq ft but has not renewed its lease, which expires later this year; the tech giant will move to Mapletree Business City II in Pasir Panjang.

QIA is likely to be granted the right of first refusal to buy the rest of BlackRock's space in the Asia Square development - around 793,100 sq ft NLA (inclusive of 30,900 sq ft of retail space) in Tower 2.

This excludes the space on level 32 and upwards of the 46-storey tower, which is occupied by The Westin Singapore. BlackRock sold this space in late 2013 to the Daisho Group of Japan.

BlackRock could not be reached for comment on Wednesday, and QIA declined to comment.

MGPA, which was acquired by BlackRock in 2013, developed Asia Square on two adjoining 99-year leasehold plots that it clinched through separate Urban Redevelopment Authority tenders in 2007.

QIA's purchase of Asia Square Tower 1 will be the biggest property acquisition in Singapore by the sovereign wealth fund (SWF); the group also owns the landmark Raffles Hotel here through its unit Katara Hospitality.

Last year, QIA teamed up with The Ascott, the serviced residences arm of CapitaLand Group, to set up a 50:50 US$600 million fund. So far, the fund has acquired properties - one each in Paris, Tokyo and London.

QIA also has a US$10 billion joint-venture fund with the Citic Group of China.

Last year, QIA acquired a 37.5 per cent stake in Tower 1 in International Towers Sydney, a development with three office towers in Sydney's Barangaroo South precinct by Lend Lease. The development cost for Tower 1 is estimated at A$2 billion, based on earlier media reports.

In London, QIA owns Harrods department store. It also acquired the Canary Wharf Group last year through a joint venture with Brookfield Property Partners. As well, the SWF owns HSBC's global headquarters in Canary Wharf. In the US, QIA has a stake in Brookfield's US$8.6 billion mixed-use development in Manhattan West in New York City.

The SWF aims to diversify the oil and natural gas-rich Middle Eastern country's wealth across geographies, sectors and asset classes.

Another Middle Eastern SWF that has been active in the Singapore property market is the Abu Dhabi Investment Authority (ADIA). It has a 70:30 partnership with Lend Lease that is developing an office, retail and residential project on a site in Paya Lebar Central; this was bought at a state tender last year for S$1.67 billion.

ADIA is also said to be an investor in the Asian Retail Investment Fund (ARIF), managed by Lend Lease. ARIF has a 75 per cent stake in the 313@Somerset mall in Orchard Road and the Jem office and retail development in Jurong East.

The Abu Dhabi SWF is also believed have invested in the BlackRock-managed fund that developed Asia Square.


This article was first published on June 2, 2016.
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