With borrowing costs seen to be peaking, some investors are eyeing pockets of opportunities, including potential for exits via strata sales, asset repositioning, or simply taking a longer-term view.
In the financial district, CBRE and Cushman & Wakefield have been quietly marketing AEW’s 27 office floors at 30 Raffles Place, formerly known as Chevron House, which is located next to Raffles Place MRT station. BT understands that the guide price is S$725 million, reflecting a price of S$2,883 psf on a net lettable area (NLA) of 251,465 sq ft. The space covers the sixth to 32nd floors of 30 Raffles Place.
The building sits on a site with a 99-year leasehold tenure which has a balance term of about 65 years. AEW’s office space is said to be about 75 per cent leased, with WeWork as a major tenant.
Near the Orchard Road shopping belt, a unit linked to TE Capital is in exclusive due diligence for a potential purchase of VisionCrest Commercial at about S$3,000 psf on strata area; this would amount to roughly S$460 million.
The 11-storey building has a strata area of 154,711 sq ft, comprising 149,652 sq ft of offices and 5,059 sq ft of retail space. The office space is on levels two to 11, with one strata title per floor. The retail space, on the first floor, comprises 11 strata units.
VisionCrest Commercial is owned by the property unit of German asset manager Union Investment. CBRE and JLL conducted an expression of interest (EOI) exercise for the asset that closed in August.
In the suburbs, Cushman & Wakefield and JLL have been appointed as joint marketing agents to conduct an EOI exercise for The Seletar Mall, located next to the Fernvale LRT station in the Sengkang West area.
The guide price for the property works out to about S$2,640 psf on the NLA of some 189,500 sq ft. Market observers say the net yield is in the low-4 per cent region.
The mall is on a site with a balance leasehold tenure of about 87.5 years. Tenants include FairPrice Finest, Shaw Theatres, Popular Bookstore and Harvey Norman.
Market observers noted that borrowing costs for the purchase of commercial properties these days are in the 4 per cent to 5 per cent range, compared with around 1 per cent to 2 per cent in early 2022.
For retail property, net property yields reflected in transacted and asking prices range from sub-3 per cent to low-4 per cent, depending on the location, size and land tenure of the mall. For offices, yields range from 2-plus per cent to 3-plus per cent.
Compared with offices, retail looks more attractive, as the gap between net yield and borrowing costs is narrower – or even non-existent. With retail rents and capital values having eased amid the Covid-19 pandemic, potential investors see value in buying into choice malls to tap a recovering market.
“There are investors prepared to take a longer-term view on the Singapore property market. Some are also able to buy with low or even no gearing; for them, high borrowing costs would not come into the equation,” said the private equity firm executive.