The Qatar Investment Authority has agreed to buy BlackRock Inc’s Asia Square Tower 1 for S$3.4bn ($2.5bn) in the biggest office transaction in Singapore.
The QIA will purchase the office tower in the central business district in the largest single-tower sale in the region, according to a joint statement from the fund and BlackRock on Monday.
The building has been on the market since last year after bids by a consortium of Norway’s sovereign wealth fund and CapitaLand Ltd, Singapore’s largest developer, and rival bids by ARA Asset Management Ltd failed to clinch the deal.
BlackRock, the world’s largest asset manager, had to settle for a lower price than it had originally anticipated for the 43-story tower, whose tenants include Citigroup Inc and KKR & Co, as rents in the city state decline amid slowing economic growth and increased supply. BlackRock said last year that it could get more than S$4bn for Asia Square Tower 1 and may also sell Asia Square Tower 2. The two towers together are worth S$7bn, the firm estimated at the time.
“There has been a lot of near-term negativity on the Singapore market,” John Saunders, head of Asia-Pacific for BlackRock Real Estate, said in a phone interview. “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 are 90% occupied and vacancies in the area are below 4%, Saunders said.
Qatar will add Asia Square to a real estate portfolio that also includes four Los Angeles office buildings acquired earlier this year with real estate investment trust Douglas Emmett Inc for $1.34bn, London’s Canary Wharf Group and parent Songbird Estates.
In 2015, the QIA was the second-biggest foreign purchaser of US offices, following its investment in Brookfield Property Partners' $8.6bn Manhattan West project.
The QIA, as the wealth fund is known, has invested about $38bn in property around the world, with $21.7bn in office transactions and $7.5bn for hotels, including the 2014 purchase of the St Regis Rome, according to Real Capital Analytics Inc.
The fund may buy the luxury St Regis hotels in New York and San Francisco from Starwood Hotels & Resorts Worldwide Inc, people with knowledge of the matter said in May.
About $100bn of the Qatar Investment Authority’s stakes in local companies such as Qatar Airways and QNB will be placed into a new internal division named Qatar Investments, people with knowledge of the matter said last month. The move is of the biggest overhaul of the way the fund is run since Sheikh Abdulla bin Mohamed bin Saud al-Thani was appointed chief executive officer in 2014.
Office leases in Singapore are forecast to decline as much as 25% in a prolonged slump that may last until the end of 2018 as demand slows, Daiwa Securities Co said in March.
Asia Square is owned by MGPA, which was acquired by BlackRock in 2013. MGPA developed the towers on two adjoining plots it won in 2007 at government land auctions. Tower 1 has an occupancy rate of 91%, according to Cushman & Wakefield Inc.
Google Inc, one of the tenants, plans to relocate to a business park outside the main business district after its lease ends this year, the broker said.
Jones Lang LaSalle and CBRE Group Inc were joint advisers to BlackRock for the Asia Square Tower 1 transaction, according to the statement.