In the first transaction of an entire Singapore office building this year, DBS Group announced on Friday evening that it is selling PwC Building at 8 Cross Street to an indirect subsidiary of Manulife Financial Corp.
The deal values the 28-storey office block at S$747 million, which works out to S$2,100 per square foot based on its net lettable area of 355,704 sq ft.
The property is on a site with a balance lease term of 78 years.
Upon completion of the sale (which is scheduled to take place by the end of next month), DBS is expected to book about S$350 million net profit from the transaction. The sale is also expected to result in a contribution of the same quantum to the group’s consolidated net tangible assets, DBS said in a filing with Singapore Exchange after the close of trading on Friday.
CBRE brokered the transaction.
Savills Singapore research head Alan Cheong described the transaction as a “plain vanilla deal”. “Insurance companies have to abide by very strict investment criteria which leave very little room for structuring,” he added.
Manulife did not respond to queries by press-time.
The transaction is understood to be an investment-driven purchase though the Canadian insurer is expected to occupy part of the building, which is at the corner of Cross and Telok Ayer streets.
Manulife currently operates at a few locations on the island, but principally at Manulife Centre in Bras Basah Road, where it is understood to have a lease for about 100,000 sq ft which runs out later this year.
What makes PwC Building a good acquisition for Manulife is that close to half of the building will be vacated when anchor tenant PricewaterhouseCoopers (PwC) moves to Marina One, where it has signed a lease for around 180,000 sq ft.
Observers say that for Manulife, having a physical presence in Singapore’s financial district would be in sync with the increased market share that it is eyeing in the Republic following its 15-year exclusive bancassurance partnership with DBS which kicked in on Jan 1 last year.
DBS’s sale of PwC Building is being effected through a sale of the entire equity interest in DBS China Square (DCS), which owns the asset. DCS has accounted for the buildling on a historical cost basis, DBS Group said in its announcement. “The building was constructed by DCS in 1999 and is currently held for investment purpose,” South-east Asia’s largest bank said.
Giving details of the transaction, DBS Group said that its fully-owned subsidiary DBS Bank has agreed to sell its entire equity interest in DCS to an indirect subsidiary of Manulife Financial Corp for about S$358 million in cash.
The consideration was arrived at on a “willing-buyer willing-seller” basis and takes into account the unaudited book value of DCS as at Dec 31, 2016, adjusted based on an agreed property value of S$747 million for the building as well as the repayment by the purchaser of the shareholder’s loan of S$402.6 million to DCS.
“The consideration is subject to certain post-completion adjustments which are not expected to be material,” the group said.