Perennial-led consortium may put AXA Tower on the market

A CONSORTIUM led by Perennial Real Estate Holdings Limited is considering an en bloc sale of AXA Tower at no less than S$1.65 billion.

This translates to S$2,150 per square foot (psf) based on the total strata area of about 767,358 sq ft after an asset enhancement initiative (AEI), Perennial said on Monday.

This sale consideration “follows the receipt of a number of en bloc sale enquiries for the development, as a result of the improved Singapore office market environment and strong interest in the commercial office segment”, it added.

The consortium, which comprises Perennial chairman Kuok Khoon Hong and other investors, intends to appoint JLL and CBRE as joint marketing agents to manage enquiries on the potential sale.

JLL Singapore international director and head of Singapore capital markets, Greg Hyland, said that the positive shift in investors’ sentiment since the beginning of this year has been supported by underlying leasing momentum in newly completed projects and positive rental growth in the second quarter.

“Over the next two to three years, rental growth is expected to accelerate as new supply is subdued and take-up, underpinned by steady economic growth, remains buoyant,” Mr Hyland said.

He felt that while the transaction size is relatively large, the pricing on a psf basis is attractive given that AXA Tower is an iconic Singapore building with good connectivity.

Taking into account the AEI cost of S$140 million that is fully debt-funded and which will be borne by the potential new owner, the post-AEI strata value would be about S$2,333 psf.

CBRE executive director of capital markets in Singapore Jeremy Lake felt that at such strata value, AXA Tower presents a good investment proposition when compared to recent commercial transactions and tender land sales, with “further value supplemented by its retail and medical components”.

AXA Tower still encompasses unutilised gross floor area of about 185,850 sq ft post-AEI, which could be harnessed to create further value.

The AEI includes expanding the retail podium to about 60,000 sq ft, building a new 32,000 sq ft two-storey annexe block fronting Maxwell Road to house medical suites, improving the efficiency of the offices, upgrading the office lifts, a new office lobby, and enhancing the building’s overall connectivity and drop-off points.

The development is connected via an underground pedestrian link to Tanjong Pagar MRT Station and the upcoming Prince Edward MRT Station, which is expected to be completed in 2025.

To-date, the total strata office sales achieved at AXA Tower are about S$41 million, and the average transacted price of the office units was about S$2,559 psf. Units on the low-zone were transacted at about S$2,450 psf, while those in the middle-zone were transacted at close to S$3,000 psf.

Perennial and Mr Kuok holds a total 41.3 per cent stake in AXA Tower. Shares of Perennial were down 0.5 cent at 88 Singapore cents on Monday.