CapitaLand Investment Ltd. and Malaysian developer IOI Properties Group Bhd
. are nearing a deal to buy an iconic office development in Singapore’s central business district, according to people familiar with the matter.
The Temasek Holdings Pte-backed Singapore property asset manager and IOI are looking to form a joint venture to finalise a transaction for One Raffles Place, the people said, asking not to be identified because the information is private. The property is likely to be sold for just under S$2.4 billion ($1.9 billion), one of the people said.
The development, comprising two office towers with 62 and 38 floors, along with a retail mall, is set to join a spate of commercial real estate assets changing hands as the market revives, supported by low borrowing costs and sellers’ greater willingness to be flexible on pricing.
OUE REIT, a real estate investment trust backed by the wealthy Indonesian Riady family, controls a firm that owns an 81.54% interest in the property. Singapore developer UOL Group Ltd., Khattar Holdings Pvt and United Overseas Bank Ltd. have minority stakes in the holding company.
UOB, one of Singapore’s biggest lenders, also holds the remaining 18.46% in the complex and occupies space in it. The lender and UOL are backed by Singapore’s billionaire Wee family.
An OUE REIT spokesperson referred to its exchange filing in February that it had a process underway to determine market interest in the development along with UOB. A spokesperson for IOI did not respond to an emailed request for comment.
Spokespeople for UOB and CapitaLand Investment declined to comment. A spokesperson for UOL was not immediately able to comment. Sat Pal Khattar, a former longtime lawyer who controls Khattar Holdings, referred to media reports and said the firm looked forward to the sale "if and when it happens.”
OUE REIT’s shares rose as much as 2.9% in late morning trade on Friday, the most in nearly a month. CapitaLand Investment declined as much as 1.5% and IOI shares fell by up to 2.2%.
Singapore has seen a return of large-scale real estate transactions. After a record $10 billion of deals for commercial real estate in the first half, more in the pipeline could push the city-state beyond a high last seen in 2019, data provider MSCI Inc. said in a recent report.
The buyers are exploring a partial redevelopment of the complex although UOB will retain space it occupies in it after the complex’s sale, a person familiar with the latest deal discussions said.
The sellers were initially looking to sell the development for as much as S$2.5 billion, the person added. One Raffles Place was worth S$2.37 billion based on a valuation of the stake the REIT controls at the end of 2025. It has 65,309 square meters (702,980 square feet) of lettable space.
Spokespeople for CBRE Group Inc. and Jones Lang LaSalle Inc., which have been marketing the asset, did not respond to emailed requests for comments.
People familiar with the matter have previously cited challenges in selling the asset, saying the earlier pricing was seen as high because an acquisition of the complex will likely involve more capital outlay for redevelopment. Most of the complex dates back to the 1980s but only one of its towers and part of its retail space have long-term leasehold tenures lasting for centuries. The other tower and 75% of the retail space have tenures that will expire by the 2080s.
Malaysian tycoon Datuk Lee Yeow Seng’s IOI has been expanding its presence in Singapore with a slew of acquisitions, including most recently Asia Square Tower 2, an office building it agreed to buy for S$2.48 billion from a REIT backed by CapitaLand Investment. - Bloomberg
