Hitachi Tower is now not expected to be
put up for sale. The Goldman Sachs funds which own the 999-year leasehold
office block along Collyer Quay are instead thought to be looking to
refinance the loan on the asset which matures in January next year.
 |
| New strategy: The improving outlook for the S'pore
office market is cited as a reason why Goldman Sachs is working to
lease out the office block in Collyer Quay |
The driver for the change in strategy
is the improving outlook for the Singapore office market, say analysts.
'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 bought 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; the loan quantum is believed to be about 70 per cent
of the purchase price.
Because the 37-storey building's value
today would be much lower than the purchase price then, the loan quantum
for any refinancing deal today is also expected to be lower. Some industry
players suggest that Hitachi Tower could be worth between $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.
Over the past few months, Goldman Sachs
funds have made two major office divestments in Singapore - Chevron House
(behind Hitachi Tower) which was sold last month for $547 million or
$2,083 psf of NLA, and DBS Towers One and Two at Shenton Way, which were
disposed of 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 on the first two
levels. The property also has 148 carpark lots in the basement.
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 c
of next year.
Finding ne
hunk of space occupied by Amex and
Stanchart will expire in the first half w 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.
Hitachi Tower, which was completed in
1992, was developed by a joint venture between Ong Beng Seng's privately
held Reef Holdings and Japan's Kowa Real Estate. The duo also developed
Chevron House (formerly Caltex House) on an abutting site which today has
a remaining lease of about 78 years.
While Hitachi Tower will not be offered
for sale now, potential investors keen on the Singapore office market will
have other offerings to consider.
These include 1 Finlayson Green. Its
owner, a fund managed by Lucrum Capital, acquired the 19-storey freehold
office block for $145 million or $1,630 psf of NLA in March.
After factoring in fees and other
expenses, the final cost to Lucrum was thought to be about $155-157
million. Lucrum was set up by Indonesian investor Norman Winata.
BT understands that the Lucrum fund
recently received offers of over $200 million for 1 Finlayson Green and is
mulling whether to sell the building on an en bloc basis or to try and
extract higher per square foot prices by selling strata-titled floors
individually. - 2010
October 13 BUSINESS
TIMES
