On the face of it, news surfacing last month that BlackRock Real Estate has appointed agents to sell the first of its two-tower Asia Square development in Singapore, suggests it has accelerated its strategy for the asset.
According to multiple reports, the world’s biggest asset manager appointed brokers CBRE and JLL to sell Asia Square Tower 1 for more than S$4 billion (€2.65 billion; $2.96 billion).
The firm declined to confirm the sale process, a spokesperson stating: “The nature of this asset is that it regularly attracts attention and we continually assess the market for the best outcomes for our tenants and investors.”
But that has not stopped speculation about the 1.285 million square foot office. One source told PERE: “It is the talk of the town with people believing that it may go to a Chinese sovereign wealth fund of high net worth at or above S$3,000 per square foot.”
Asia Square was developed by private equity real estate firm MGPA which was acquired by BlackRock in 2013.
At a cost of S$2.97 billion, the land acquired by MGPA’s pan-regional Asia Fund III, sparked controversy as the outlay represented the lion’s share of the $3.9 billion fund’s equity, meaning investors were heavily weighted to one Asian market.
A sale at the speculated asking price would equate to approximately S$3,100 per square foot, a record for Singapore. PERE last year understood the firm wanted more for the asset. A note circulated to investors detailed that, in fact, then the firm wanted S$3,638 per square foot. “We aren’t commenting on speculated rental values or sale prices,” BlackRock’s spokesperson said.
However, the note also forecast a sale in Q4 2016 so the appointments of CBRE and JLL would indicate BlackRock has brought forward its plans to exit. PERE’s source, who said he had received marketing particulars, expected expressions of interest to be due by August and a final closing is slated by year-end.
However, he predicted its size will make it tricky to offload. Pointing to the first deadline, he said: “This is 60 days after the teaser went out so is a sign this will be a hard sell as most trophy assets give only 30 days and move much faster to a closing. They will have to scour the earth for someone who has S$4 billion-plus to bet on the Singapore office market.”
Betting right depends on the city-state’s leasing market. Asia Square Tower 1 is 89 percent occupied, but certain tenants are rumored to currently be considering alternative, cheaper accommodation, and, at the end of 2016, a wave of new development will be ready for occupation. It remains to be seen whether underwriting targets are hit.