TE Capital, LaSalle Investment Management JV eye forward sale of new office project on Cecil Street

The TE Capital Partners and LaSalle Investment Management tie-up that owns the PIL Building along Cecil Street is considering a forward sale of the new 20-storey freehold office project to be built on the site.

Word on the street is that the joint venture is eyeing a price of S$4,000 per square foot on the new project’s total net lettable area (NLA) of slightly over 190,000 sq ft, which would translate to more than S$760 million.

The idea is to sell the entire asset rather than individual strata-titled units. The Urban Redevelopment Authority’s (URA) written permission for the proposed project granted in July indicates that the development may be strata subdivided.

When completed in 2026, Solitaire On Cecil will rise to 127 metres, up from the existing PIL Building’s height of 73 metres, and comprise predominantly office space, which will be on 15 levels ranging from 11,000 sq ft to 13,000 sq ft. All the office floors will have a floor-to-floor height of 4.9 metres (16 feet), higher than the typical 3-3.5 metres for newer office buildings in Singapore’s central business district.

On Level 1 will be a few food and beverage outlets. There will be 25 car parking lots in the 2 basement levels.

The DP Architects-designed project will incorporate about 120 bicycle-parking lots and end-of-trip showering and changing facilities on Level 3. On level 4 will be a sky garden with quiet areas as well as a gym and other facilities. The project will also have a rooftop sky lounge for collaborative use.

The project’s approved gross floor area (GFA) is 218,796.50 sq ft, a nearly 50 per cent or 71,500 sq ft increase from the existing 147,315 sq ft. Solitaire On Cecil’s approved GFA reflects the 11.2 plot ratio stipulated for this commercial-zoned site under the URA’s latest Master Plan. The property has a total land area of 19,535 sq ft comprising 3 plots, the biggest of which is about 14,985 sq ft and freehold. It is flanked by 2 smaller plots with 99-year leasehold land tenures that started from May 1977; the authorities have given the nod to upgrade the land tenure of these 2 plots to freehold.

Solitaire Cecil Pte Ltd, the joint-venture held by funds managed by TE Capital Partners and LaSalle Investment Management, completed its purchase of PIL Building for S$323.8 million earlier this year. It will also have to make payments to the state for the rights to develop the additional GFA and to extend the leases for the 2 smaller plots.

TE Capital Partners, which will be the operating partner for the joint venture, is a real estate investment management firm founded by siblings Terence and Emilia Teo, children of Teo Tong Lim, managing director of Tong Eng Group.

PIL Building was sold by Pacific International Lines, majority owned by Heliconia Capital Management, a wholly owned subsidiary of Temasek Holdings. The sale was to help PIL focus on its core business of container shipping, logistics and container manufacturing.

The existing 17-storey building is expected to be demolished in the second quarter of 2023. It was completed in 1981 and refurbished in 2011.

Period of angst and uncertainty

On the S$4,000 psf pricing expectation for the potential forward sale of Solitaire On Cecil, Alan Cheong, executive director of research at Savills Singapore, commented: “In a period of great angst and uncertainty on multiple fronts, yields may not matter that much to some investors who may wish to have peace of mind by switching their asset holdings into freehold real estate in a safe-haven.”

In terms of psf of existing NLA, the highest price fetched for an entire office building in Singapore is S$3,721 psf, for the S$500 million sale of the freehold Robinson Point by Tuan Sing to Viva Land. The deal was entered into in 2020 and completed in 2021. However, market watchers have suggested the record price probably took into account the property’s redevelopment potential. This year, Viva Land also acquired the next-door SO/ Singapore hotel; there is scope to rejuvenate the 2 properties by tapping the URA’s CBD Incentive Scheme.

For a more recent example of a reasonably large sized office space with similar tenure in the CBD, observers point to the 8th floor of Samsung Hub, with a strata area of about 13,111 sq ft; this was transacted in July this year at S$4,050 psf, amounting to nearly S$53.1 million, going by URA Realis caveats data. This remains the highest psf price for a whole-floor transaction in the 999-year leasehold building, matching that paid for Level 9 last year.

Samsung Hub is one of the very few 999-year leasehold/freehold buildings in Singapore’s CBD offering strata office play to investors. The 30-storey development in Church Street, which received Temporary Occupation Permit in November 2005, has offices from level 8 to the top floor.

Level 31 at Suntec Tower 2 sold for S$3,350 psf

Separately, the 31st floor of Suntec Tower 2 is changing hands at S$41.15 million or S$3,350 psf on the strata area of about 12,282 sq ft. This sets a new record psf price for an entire floor in the tower, toppling the roughly S$3,300 psf that a Singapore permanent resident (PR) of Chinese descent paid for the 30th floor, with a strata area of 11,743.52 sq ft, in the same tower in June.

In the latest deal, a company controlled by Arcc Holdings boss Tony Chen and a family member sold the 31st floor to a company whose shareholders are citizens of China or Cambodia; none of them is a Singapore PR.

Suntec Tower 2 has 44 storeys and is on land with a balance lease term of about 65.5 years.