Overseas Union Enterprise (OUE) owned by the Lippo Group, has just bought DBS Towers 1 and 2 with a value of 870.5 million Singapore dollars, or about 970 Singapore dollars per square foot. (1 square foot = 0.0929 m2). It became the largest commercial property deals in Singapore this year, since the year 2008.Purchase DBS Tower 1 and 2 in accordance with our expectations to increase the value of company assets to about 10 billion Singapore dollars in five years to seven years into the future.
- Stephen Riady
Both towers are located at 6 Shenton Way No. It can be turned into mixed retail and office center. Plans to increase the quality of some property assets is still studied.
The Business Times on Thursday (12/8/10) reported, OUE announced the purchase after the stock market closed yesterday. The purchase cost of using internal funds and debt, which will be completed in September or October. The seller is a Goldman Sachs real estate fund, which is likely to reap big profits.
The largest office building sale agreement previously occurred in early 2008 before the global financial crisis exploded. This includes the sale of Singapore Power Building at Somerset Road with a value of 1.01 billion Singapore dollars, or about 1836 Singapore dollars per square foot.
Speaking with The Business Times, Executive Chairman of OUE Stephen Riady said the purchase of DBS Tower 1 and 2 in accordance with hopes to increase the value of company assets to about 10 billion Singapore dollars in five years to seven years into the future. Until June 30, assets of the company reached 2.93 billion Singapore dollars.
Both towers have been leased out to 99 years was worth approximately one billion Singapore dollars, and they now still have the right to lease for 56 years. The towers were leased to tenants such as DBS Bank, Deloitte & Touche, and Aviva.
OUE is considering several options to improve the quality of the building. "We're not going to buy lots of assets and not do anything with it ... We see a lot of value can we create in the next few years," says Stephen Riady.
"OUE can create more area that can be leased on the second tower. Although the Lippo Group has a region with gross floor area of about 1.24 million square foot, but the amount of revenue derived only from an area of 883 000 square foot," he said.
"The first floor can be built into the retail space, and offices to take his side," Riady said. "This is only one possibility. We have a number of options we're studying," he added.
Market observers suggest that OUE build residential projects in the same area. Number of condos in Tanjong Pagar growing in recent years. The last condo was launched in Shenton Way No. 76 which sold quickly at a price up to 2,000 Singapore dollars per square foot.
Cushman & Wakefield managing director Donald Han says OUE may consider rebuilding DBS Tower 1 into a residential-retail project. OUE can maintain DBS Tower 2 as a block of offices but also increase the amount of space.
Donald added if OUE get approval from local authorities on time, OUE can start launching the sale of residential units before the year 2012, when DBS began preparing the room emptied and moved to the Marina Bay Financial Centre.
Stephen Riady said the improvement of asset quality is applied gradually, while OUE also benefited from rising rents office space in both towers after the leasing market continued to waver.
According to Executive Director of CB Richard Ellis (CBRE) Jeremy Lake, rents at DBS Tower 1 Singapore about five dollars per square foot, while rents in Tower 2 of about 6 to 6.5 Singapore dollars per square foot. "This price could increase by around 10 percent until the end of this year, following the office market recovery," said Jeremy.
OUE has something encouraging yesterday after the company booked net profit of 16.7 million Singapore dollars in the second quarter, in contrast with the situation last year where OUE loss of 47.8 million Singapore dollars.
Higher revenue from the hospitality business and the contribution of the New Mandarin Gallery, recorded a profit.
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