BlackRock’s Asia Square Tower in Singapore. Source: Wikimedia
Qatar Investment Authority (QIA), the Qatari sovereign wealth fund, has agreed to buy BlackRock’s Asia Square Tower 1 for S$3.4 billion (US$2.5 billion) in the biggest office transaction in Singaporean history.
Qatar’s purchase of the office tower is Asean’s largest single-tower sale, according to QIA and BlackRock. Bids by a consortium of Norway’s sovereign wealth fund and CapitaLand, Singapore’s largest developer, and rival bids by ARA Asset Management failed to clinch the deal.
Analysts feared the deal would have little affect on the city-state’s overall rental market.
“This is not a deal that triggers more deals, because of the supply and demand situation,” said Nicholas Mak of SLP International Property Consultants.
He said developers were set to add 4 million square feet to Singapore’s office space in 2016, equivalent to about 5 per cent of the current market, which would be followed by another 1.4 million in 2017.
Singapore’s office leases were forecast to fall as much as 25 per cent in a prolonged slump, Daiwa Securities estimated this year. The average downtown monthly gross rent fell 4.4 per cent to S$9.06 a square foot in Q1 2016 from the previous quarter, said Jones Lang LaSalle.
BlackRock, the world’s largest asset manager, settled for a lower price than it had anticipated for the 43-storey downtown tower, whose tenants include Citigroup and KKR & Co, as Singaporean rents have fallen amid slowing growth and rising supply. BlackRock announced in 2015 that it could get more than S$4 billion for Asia Square Tower 1 and may also sell Asia Square Tower 2. The two towers were worth S$7 billion at the time, the firm said.
“There has been a lot of near-term negativity on the Singapore market,” said John Saunders of BlackRock Real Estate. “I think it’s a little bit overdone. There is some new stock coming on, but what tends to happen in Singapore is you get a big piece of supply that temporarily can disrupt the market, but then demand is always usually pretty strong.”
Both the Asia Square towers were 90-per-cent occupied and downtown vacancies were below 4 per cent, Saunders said.
QIA bought four Los Angeles office buildings in 2916 with real estate investment trust Douglas Emmett for US$1.34 billion, London’s Canary Wharf Group and parent Songbird Estates. Qatar, during 2015, was the second-biggest foreign purchaser of US offices, following its investment in Brookfield Property Partners LP’s US$8.6 billion Manhattan West project.
The QIA has invested about US$38 billion in property around the world, with US$21.7 billion in office transactions and US$7.5 billion for hotels, including the 2014 purchase of the St Regis Rome.
Sources say the QIA may buy the St Regis hotels in New York and San Francisco from Starwood Hotels.