77 Robinson Road, formerly known as SIA Building, is expected to be up for sale soon.
Its owner, German fund manager SEB, could be looking for a price of around $2,300-2,500 per square foot (psf) on net lettable area, which works out to around $678-737 million, property experts reckon.
The 35-storey office site has a remaining lease of about 82 years. It has a total net lettable area of about 295,000 sq ft and 180 car parking lots.
Singapore Airlines sold the office building in June 2006 for $343.88 million or about $1,165 psf to a CLSA Capital Partners-linked fund, which in turn flipped it 10 months later for $526 million or $1,783 psf to SEB.
The building’s maximum development potential has been tapped; under Master Plan 2008, the site is zoned for commercial use with an 11.2+ plot ratio (ratio of maximum potential gross floor area to site area).
The property was completed in 1997. This was a $175 million redevelopment of the original 17-storey SIA Building which was completed in 1968.
The lease on the site was topped up to 99 years in February 1994, which means that the lease will now expire in February 2093. Interestingly, the lease for 71 Robinson Road next door and, some sources now say, also that for Afro Asia Building nearby have been topped up to expire at about the same time.
Experts say that the idea would be to have all sites on that stretch revert to the state simultaneously to allow for comprehensive planning and redevelopment of the area.
For this reason, most property consultants reckon that the authorities may not approve a further lease upgrade on the 77 Robinson Road site – which could create uncertainty among some investors and remove the option for redeveloping the site to residential use.
However, other analysts reckon that property funds and other investors confident about prospects for the Singapore office market would still be keen on the property based on its existing use and balance site lease.
Savills Singapore’s research head Alan Cheong noted that over $6 billion of large CBD office blocks changed hands last year; the momentum has continued this year with nearly $2 billion transacted so far.
‘Several major deals are in the pipeline. Prices of Grade A office space has risen about 50 per cent since the beginning of last year,’ he added.
Craig Ward, the company’s director of regional capital markets, says: ‘There are a number of investors – both domestic and international – looking actively into Singapore’s CBD office market. The investor profile is wide-ranging, from opportunistic to core and core-plus funds, Reits and local property companies. Savills is currently working closely with two global investors with an active requirement to purchase their first commercial property assets in Singapore’s CBD.’
Jones Lang LaSalle’s head of Asia-Pacific capital markets Stuart Crow says: ‘There’s less foreign equity chasing office deals here this time around compared with the last office investment boom which peaked in first-half 2008. Many of the private equity and European funds which were active in 2006/2007 are not in the market at the moment, and buyers are predominantly local.’
The highest price achieved for a CBD office building was $3,125 psf that Commerz Real paid for 71 Robinson Road in April 2008. So far in the current office upcycle, the highest price achieved is around $2,500-plus psf.