BASF selling 5 office floors at Suntec Tower One for $129.3 million

Five office floors in Suntec Tower One are changing hands for a total sum of S$129.3 million, which works out to S$2,400 per square foot on strata area of 53,863 sq ft, based on caveats data.

The five floors - Levels 24, 25, 34, 35 and 36 - are being sold by BASF South East Asia, a part of German chemicals giant BASF, which currently occupies the space.

The floors are being bought by companies which are believed to be linked to the Singapore-based ARA group.

Suntec City is on a site with a balance lease term of around 71 years.

BASF - which is involved in a broad range of areas from chemicals, plastics, performance products and crop protection products to oil and gas - is expected to lease back at least some of the space it is selling.

The Business Times could not reach officials at BASF in Singapore as well as ARA on Thursday.

Savills Singapore, which is understood to have brokered the transaction, declined to comment.

BASF is headquartered in Ludwigshafen, Germany.

In 2015, the group posted sales of 70 billion euros (S$106 billion) and income from operations before special items of around 6.7 billion euros, according to information on its website.

Market watchers note that the S$2,400 psf pricing for the Suntec City office space in the latest deal is lower than the S$2,648 psf achieved in November 2015, when Maybank Kim Eng Properties sold three floors, Levels 12, 13 and 39, at the adjacent Suntec Tower Two to Suntec Real Estate Investment Trust (Suntec Reit) for S$101.56 million under a sale-and-leaseback arrangement.

That transaction involved a total strata area of about 38,352 sq ft and a net property income yield of about 3.9 per cent.

CBRE director of investment properties Sammi Lim said: "The latest transacted price on the surface appears to be a lower per square foot rate than the deal a year ago, especially given that the floors in the recent transaction are on higher levels.

However, given the total deal quantum, such bulk discount is considered fair by industry standards.

Differences between the structures of the two deals may also have affected the pricing, she added.

Suntec Reit is managed by ARA Trust Management (Suntec) - a fully owned subsidiary of ARA Asset Management.

The Reit owns Suntec City mall, the whole of Suntec Towers Four and Five and some office units in Suntec Towers One, Two and Three, along with a 60.8 per cent effective interest in Suntec Singapore Convention & Exhibition Centre (Suntec Singapore).

It also has a one-third stake in One Raffles Quay and a one-third interest in Marina Bay Financial Centre Towers 1 and 2 and the Marina Bay Link Mall.

While some industry observers suspect that Suntec Reit may be involved with the latest purchase of the five floors being sold by BASF, others suggest the buyer is more likely to be a private fund managed by ARA Asset Management.

ARA Asset Management recently completed the purchase of a 50 per cent stake in Capital Square from Alpha Investment Partners for S$475.5 million; the deal valued the entire building at S$951 million or S$2,450 psf.

Capital Square is on a site with about 78 years balance lease term.

This article was first published on December 14, 2016.
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