DBS buys stake in Marina Bay tower for $1b

PHOTO: DBS buys stake in Marina Bay tower for $1b

SINGAPORE - 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.