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Robinson 77, the former building of Singapore Airlines (SIA), has been put up for sale with a $725 million price tag, reported Singapore Business Review.
That is up from the $530.8 million that CLSA Real Estate paid for in 2016.
DBS Equity Research noted that CLSA had given the 35-storey building a major revamp which saw its net lettable area (NLA) increase from 293,269 sq ft to 307,585 sq ft. The building’s second-storey carpark was also converted into 15,000 sq ft of NLA.
With 74.5 years left on its lease, the building is 91 percent occupied, with tenants including NTUC Link, Adidas, Coach, Sony Pictures, Ernst & Young and DVB Bank.
DBS Equity Research analyst Mervin Song said the $725 million price would translate to a 3.0 to 3.5 percent net yield in the first year following the acquisition.
“The potential sale of Robinson 77 on a forward yield of 3-3.5 percent and exit yield of sub-3 percent once again highlights the resiliency and strength of capital values of Singapore office buildings.”
If sold at $725 million, Robinson 77 would follow the tight yields achieved by office buildings over the past 12 to 18 months. 55 Market Street and Twenty Anson, for instance, were sold with a 1.7 percent and 2.7 percent exit yield respectively.
“These transactions/potential transactions also indicate that office REITs remain undervalued, trading at close to or below book values that are ‘conservative,’” noted Song. Generally, buildings owned by office REITS are found in more prime locations and valued using cap rates of 3.5 to 4.0 percent.
“Thus, we retain our overweight stance on Office REITs not only for the discount to book values but also the leverage to an expected multi-year upturn in office rents given modest new supply over the next three to four years,” he added.
Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg
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