TE Capital, LaSalle Make Singapore’s Largest Office Buy of the Year in $331M Deal

TE Capital Partners has joined with LaSalle Investment Management to acquire a commercial building in Singapore’s Orchard area for nearly S$450 million ($331 million), in a deal which marks Singapore’s largest office deal of 2023.

A fund advised and operated by TE Capital Partners, announced today that it has signed a put and call option agreement with Union Investment Real Estate GmbH to acquire 103 Penang Road in the city-state’s Orchard Road commercial hub, which confirms an earlier report by Mingtiandi.

The fund is backed by LaSalle Investment Management, according to sources familiar with the transaction who spoke with Mingtiandi, with the selling price for the property said to be nearly S$450 million ($330 million), which makes it Singapore’s largest office deal of 2023.

In an announcement to the Singapore stock exchange on Tuesday, listed developer Metro Holdings identified itself as an indirect, minority investor in the fund through another vehicle. LaSalle effectively holds a 50.1 percent interest in the vehicle, with TE Capital maintaining a 29.9 percent stake and Metro keeping the remaining 20 percent share, based on a regulatory filing on Tuesday.

Speaking in a panel session at the Mingtiandi Singapore Forum, Emilia Teo, a managing director at TE Capital, pointed to the quality of the freehold, LEED Gold-certified asset, and the potential to benefit from the ongoing rejuvenation of the Orchard Road area, as keys to the acquisition of the 11-storey freehold commercial building known as VisionCrest Commercial.

“Today we also have inked an agreement to purchase an asset,” Teo said, in referring to VisionCrest Commercial in a panel session at the forum. “We like that (asset) because it’s well located. It’s near transportation hubs, it’s a high quality asset as well, and we like the rejuvenation story and I think that that’s something that most investors look for.”

Strata Market Gaining Traction

The total consideration in the VisionCrest Commercial transaction works out to around S$3,023 per square foot of the property’s 148,854 square feet (13,830 square metres) of net lettable area. The agreed price is 4 percent below the S$3,157 price per square foot that Union Investment had set in a marketing exercise in July.

VisionCrest Commercial, comprising 10 office floors and 11 ground floor retail units, forms part of a mixed-use development that also includes the 265-unit VisionCrest Residence and the House of Tan Yeok Nee, a national monument of Singapore currently being used as corporate offices.

Significant tenants in the property include Manulife Financial Advisers and Puma Sports SEA Trading according to an announcement by Metro Holdings.

“The property is also nearly fully-let, thus providing an immediate rental income. We are also glad to forge the strategic collaboration with the two proven real estate partners for this investment in Singapore,” Metro chief executive officer Yip Hoong Mun in a separate statement about the firm’s latest business update released that same day.

The deal was announced just months after TE Capital, a private equity shop founded by members of the family behind Singaporean developer Tong Eng Group, and LaSalle achieved record prices in selling out the office floors in their Solitaire on Cecil JV project in Singapore’s central business district in the first half of this year.

Located at Oxley Rise near Dhoby Ghaut MRT station, VisionCrest Commercial is one of the few high-end office buildings in Singapore’s city centre with approval for strata title sales, after the Urban Redevelopment Authority (URA) restricted new strata office developments in the urban core last year.

Orchard Rejuvenation

The VisionCrest transaction has now surpassed Viva Land’s S$399 million sale of 39 Robinson Road to China-based Yangzijiang Realty, which was announced in March, to rank as the largest office deal in Singapore this year.

“Aside from talking about rent, it is also about what is going on in that area (and) in Orchard, there’s lots of rejuvenation potential,” TE Capital’s Teo said.

With the building located opposite Istana Park, which connects Orchard Road to Penang Road, VisionCrest Commercial is poised to benefit from a government plan to redevelop the Orchard Road area. City planners intend to recreate Orchard Road as a green belt in the city, with the stretch of the popular shopping street from Istana Park to SMA House set to merge with Penang Road.

The government effort has already supported a number of redevelopment projects this year, including ​​Bright Ruby Resources just over one month ago agreeing to acquire the Far East Shopping Centre on Orchard Road for a reported S$908 million ($667 million), in Singapore’s largest collective sale this year.

In August, investor Ong Beng Seng’s Hotel Properties Ltd secured provisional permission from Singapore’s Urban Redevelopment Authority to transform the Forum mall, the Voco Orchard Singapore hotel and the HPL House commercial block on Orchard Road into a 114,153 square metre (1.2 million square foot) mixed-use project.

JLL and CBRE are understood to have jointly advised Union Investment on the sale of VisionCrest.

Strata Gets Scarce

With the government having restricted the supply of new strata projects, average prices for strata office units in Singapore hit S$3,107 per square foot in the first half of 2023, up 14.5 percent from the preceding six months, and a 40 percent increase over the S$2,237 per square foot average in the first half of 2022, according to a report from Knight Frank.

In July IMC Group agreed to purchase the third floor of the Nomu building, one block away from VisionCrest Commercial at 20 Handy Road for S$3,790 per square foot.

That deal followed an unnamed Chinese investor setting a new record price per square foot for the Orchard Road area when it acquired three strata office units at the Thong Teck Building near the intersection of Orchard Road and Scotts Road for S$4,028 per square foot In November of last year.