Robinson 77 put on the market by CLSA

Price expectation is over S$725m; CLSA Real Estate-managed fund bought it for S$530.8m in 2016 and did a revamp

Thu, Aug 02, 2018

RIDING on the current buoyant Singapore office market, a fund managed by CLSA Real Estate has put Robinson 77 up for sale.

If a deal materialises by year-end at the expected price of more than S$725 million (or S$2,357 psf on net lettable area), this would most likely be the largest Singapore office sale for 2018.

At S$725 million, the net yield is estimated at 3 per cent to 3.5 per cent based on the forecast income for the building in the first year after acquisition.

The property, which was once known as SIA Building, is on a site with a balance lease of 74.5 years.

The CLSA-managed fund that owns Robinson 77 completed a major refurbishment of the 35-storey building last year, after paying S$530.8 million for the property in a deal entered into in late-2016.

While the owner declined to say how much it spent on the renovations, the market estimates it would have cost S$30 million plus.

The key asset enhancement works included converting the second storey carpark to nearly 15,000 sq ft net lettable area (NLA) of office space, upgrading and reconfiguring the main entrance lobby and recladding the building's facade. All the lift lobbies and toilets were also upgraded.

The building has achieved Green Mark Gold accreditation from Singapore's Building & Construction Authority.

Following the makeover, the building's NLA has increased to 307,585 sq ft from the 293,269 sq ft when CLSA acquired the property from the SEB ImmoInvest fund nearly two years ago.

With the major upgrade completed, there will be very little capital expenditure required by a prospective buyer which can then start riding immediately on the rapidly improving office market, note JLL and CBRE, who are jointly marketing the property through an expressions of interest (EOI) exercise.

As of last month, Robinson 77's occupancy rate was 91 per cent. Tenants include big names such as Adidas, NTUC Link, Sony Pictures, Coach, DVB Bank, and EY (Ernst & Young). In all, Robinson 77 has 301,567 sq ft NLA of office space; with most floors being either around 8,000 sq ft or 11,000 sq ft.

A prospective buyer stands to benefit from positive rental reversion on the back of a robust office rental market.

BT reported recently that at ASB Tower, which is coming up on the former CPF Building site next door, Allianz recently entered into an office lease at a gross signing rental of around S$11.50 per square foot a month. This is understood to reflect a gross effective rent of close to S$10 psf a month after taking into account the rent-free period and other incentives - a substantial increase from the low-S$8 psf gross effective rent that new office space in the area used to fetch about 18 to 24 months ago.

JLL and CBRE said they believe that Robinson 77's building quality and tenant profile would attract offers in excess of S$2,350 psf on NLA.

Currently, Robinson 77 has 6,018 sq ft NLA of retail space on the ground floor leased to three tenants: First Commercial Bank, Mellower Coffee and Old Tea Hut.

The property boasts a 90-metre-long frontage along Robinson Road; there is potential to exploit this further.

Despite the conversion of the car parking lots on the second level to office space, Robinson 77 still has 137 car park lots. It is also near four MRT stations - the existing Tanjong Pagar and Telok Ayer stations and the upcoming Shenton Way and Prince Edward stations.

Greg Hyland, head of JLL's Singapore capital markets team, said: "The Singapore office market continues to perform well with prime office rents rising 6 per cent in first-half 2018.

"Recent notable office transactions in Singapore's CBD further proved the improving sentiment among investors, who are willing to pay a lower initial income yield in anticipation of positive rent reversion and strong capital value growth. We expect Robinson 77 to generate strong interest from global, regional and local investors who are looking to enter a market poised for growth."

Jeremy Lake, managing director of capital markets, Singapore, at CBRE, said: "Investors acknowledge the positive outlook for the Singapore office market and the recent sale of Twenty Anson at S$516 million, which translates to S$2,503 psf - a new benchmark for the area - reaffirmed this. With a limited pipeline of office buildings for sale we expect there to be keen interest to buy Robinson 77."

No official closing date has been set at this stage for the EOI, but this is likely to be in late September.

Besides Twenty Anson, other major office transactions this year include MYP Plaza in Cecil Street (S$247 million) and 55 Market Street (S$216.8 million).

British property group Chelsfield is stitching together a deal to buy Manulife Centre in Bras Basah Road for around S$550 million or about S$2,300 psf. The property is being offered on a remaining leasehold tenure of about 96 years.