Allianz Real Estate and the National Pension Service of Korea have teamed up via their jointly owned AREAP Core I fund to acquire a 50% stake in Singapore’s OUE Bayfront complex.
The AREAP Core I fund is a $2.3bn investment platform in the form of a Singapore domiciled, close-end fund where NPS and Allianz are 50:50 investors.
The deal is valued at approximately S$634m, and closing is expected to happen at the end of February 2021.
The agreed price translates to a passing yield of 3.6%. The seller, OUE Commercial REIT, is guaranteeing the net property income for the first two years following completion, subject to an aggregate cap of S$6m.
The development was one of first assets in OUE Commercial REIT’s portfolio, when the trust was first listed on the Singapore Exchange in 2014. This latest valuation of the asset represents a 26.1% premium on OUE C-REIT’s original purchase price.
OUE Bayfront is situated between the Raffles Place central office district and Marina Bay precinct, overlooking Singapore’s Marina Bay. The property was completed in 2011 and has a total net lettable area of around 400,000 square feet. The complex includes OUE Bayfront, an 18-storey prime grade-A office building with rooftop restaurant, OUE Tower and OUE Link, a link bridge with retail units.
The asset has a 99.9% committed occupancy rate and was awarded the Green Mark Gold Award by the Building and Construction Authority in Singapore. Major tenants include, Bank of America Merrill Lynch, Allen & Overy and Aramco.
AREAP Core I fund’s strategy is to build a diversified portfolio of high-quality assets across Asia-Pacific. The fund has kicked off 2021 with two deals in the first month, having acquired a 90% stake in a 662,000 square foot grade-A business park office property in Zhangjiang Hi-Tech Park, Shanghai earlier in January.
In a release announcing the latest deal, Rushabh Desai, CEO Asia-Pacific, Allianz Real Estate praised the Singaporean government for their management of the COVID-19 pandemic and said he believed that over the medium to long term, the investment prospects of Singapore offices would remain favourable.
“The pandemic has re-emphasized the importance of micro location, city density, asset quality and ESG when investing in an office asset. On behalf of NPS and Allianz, we are very happy to be investing in this marquee office building in Singapore with a high-quality institutional partner such as OUE Commercial REIT,” said Mr Desai.
Allianz Real Estate’s Asia-Pacific business is headquartered in Singapore and its holdings in the region stood at $7.5bn as at the end of September 2020.
Commenting from the perspective of the National Pension Service of Korea, NPS’ Chief Investment Officer, Mr. Mr. Hyo-Joon Ahn said, “We believe OUE Bayfront will be a great addition to an already strong and stable NPS real estate portfolio. Highest quality real estate assets in irreplaceable locations prove to be resilient even in the current economic climate and provide long-term value and stable cash flow.”