Two asset management firms sold real estate in Singapore this month, fuelling speculation as to whether other such deals are in the pipeline amid an expected pick-up in the property market.
US asset management firm BlackRock on September 21 sold a landmark office building – the Asia Square Tower 2 – to CapitalLand Commercial Trust for over S$2.15 billion (US$1.59 billion), slightly below the independent valuation of S$2.11 billion.
The deal came a few weeks after Singapore’s Alpha Investment Partners sold 22 residential properties to US alternative investment manager Angelo, Gordon and Co for over S$100 million. Alpha Investment is a wholly-owned subsidiary of Keppel Capital, the asset management arm of Singapore conglomerate Keppel Corp.
According to a property analyst who declined to be named due to company policy, these deals could be a sign of more property sales to come.
“I believe the timing is about right for deals like these to happen. First, there is an increasing expectation of [a] possible rising in residential property prices,” he says. “In terms of the commercial segment, we believe that the rental prices have bottomed out, and are set to rise again.”
It’s been a challenging time for Singapore’s previously booming property market. Prices of residential properties have declined by as much as 15% since January 2017. Meanwhile, rentals of top grade office buildings have only shown signs of stabilising in the second quarter after declining for eight straight periods to the first quarter of 2017.
According to Singapore-based securities firm UOB Kay Hian, property prices in the city state are set to grow by as much as 10% in 2018 after bottoming out this year.
The price gains will be partly driven by a pick-up in home buying interest from foreigners, UOB Kay Hian says in a September 18 research report.
“Traditionally, spikes in en bloc sales are early indicators of a turnaround in the residential property market in Singapore… We can already see a slight firming up, led by mass-market properties,” the report says. “We believe that the recovery should trickle up to the mid to high-end segments. We expect property prices will bottom out in 2017, followed by a 5%-10% increase next year.”
BlackRock’s property sale was the company’s second in the city state. Last year, it sold the Asia Square Tower 1 to Qatar Investment Authority for over S$3 billion.
The Singapore properties became part of BlackRock’s alternative investment portfolio after it acquired MGPA – formerly Macquarie Global Property Advisors – in 2013.
As at June 30, 2017, BlackRock had over US$5.6 trillion of AUM, including more than $127 billion in alternative investments.
Alpha Investment, which has AUM of over S$12 billion, has not announced any other property sales in Singapore in recent years. But last year, the company, together with other key shareholders, sold their 80% stake in a Shanghai retail mall for over US$516 million.
