Goldman looks to refinance Hitachi Tower

The Goldman Sachs funds which own the 999-year leasehold Hitachi Tower along Collyer Quay are looking to refinance the loan on the asset which matures in January next year instead of selling.

The driver for the change in strategy is the improving outlook for the Singapore office market, say experts.

‘The thinking now is to get refinancing on the asset, ride the current office upcycle and perhaps sell in one or two years’ time when office values should appreciate,’ said a market watcher.

Goldman Sachs purchased Hitachi Tower for $811 million or about $2,900 per square foot of net lettable area (NLA) in early 2008. The purchase was funded mostly by a group of lenders led by Standard Chartered; about 70 per cent of the purchase price.

As the building’s value today would be lower than the purchase price, the loan quantum for any refinancing deal today is expected to be lower. Industry players suggested that Hitachi Tower could be worth around $2,300 psf and $2,400 psf. Goldman Sachs would thus be expected to come up with more equity. Additionally, or alternatively, it could potentially seek co-investors willing to pump in equity or extend other forms of funding such as mezzanine financing.

Recently Goldman Sachs funds have made two major office divestments in Singapore – Chevron House which was sold last month for $547 million or $2,083 psf of NLA, and DBS Towers One and Two for $870.5 million in August.

Hitachi Tower has a total net letable area of about 279,560 sq ft, comprising about 257,800 sq ft of offices on the third to 37th levels and 21,760 sq ft of retail space. The property also has 148 carpark lots.

Goldman Sachs is working to get the building fully leased. Currently, the occupancy rate is said to be in the low 90s. However, leases on a substantial chunk of space occupied by Amex and Stanchart will expire in the first half of next year.

Finding new tenants for this space, however, is not expected to be a major challenge, given the strong demand for office space in the Raffles Place area, say leasing agents. Leases in the building could be signed for about $7 psf a month on average currently.

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