Investment funds big sellers of property

Investment funds were big sellers of property here last year; with the value of sales more than double that of purchases amid weaker economic conditions.

The funds mainly sold off office buildings and industrial properties and invested in hotels and retail malls.

Analysts estimate that funds sold properties here worth a total of up to $3.36 billion last year.

This was well above the value of purchases, of between $1.17 billion and $1.31 billion.

Fund acquisitions were lower last year compared with 2011; funds bought $1.48 billion worth of property in 2011.

One of the biggest fund purchases last year was of Compass Point by Prudential's Asia Property Fund in a joint venture with Frasers Centrepoint for $519 million.

Fund divestments last year were mainly of office buildings, analysts said, likely because office yields have fallen as a result of rental declines while prices continued to hold firm. Average monthly gross rents for Grade A office space in the Central Business District fell by 6.9 per cent for last year overall.

Office buildings sold by funds last year include 16 Collyer Quay, formerly known as Hitachi Tower, 78 Shenton Way and 79 Anson.

NTUC Income, which already owned 49 per cent of 16 Collyer Quay, said on Wednesday it had inked a deal to buy up the remaining 51 per cent from Goldman Sachs. The building, which Goldman bought for $811 million in early 2008, is valued at $660 million for a net lettable space of 278,356 sq ft, translating to $2,371 psf.

As for 78 Shenton Way, a property fund managed by Alpha Investment Partners bought a 50 per cent stake in the building from a global fund managed by CommerzReal, a unit of German bank Commerzbank. The deal in September valued the building at $608 million, or $1,686 psf based on net lettable area of about 360,500 sq ft. CommerzReal paid $650.78 million for 78 Shenton Way in late 2007.

Last month, United Engineers bought 79 Anson for $410 million from its two owners - Singapore's Central Provident Fund Board and German fund manager SEB. The acquisition price works out to $2,029 psf based on the building's net lettable area of 202,092 sq ft.

Analysts said the trend of a net divestment of property by funds could continue this year.

Source: The Straits Times –5 January2012