SINGAPORE: Property developer CapitaLand has pulled out of talks to buy the Asia Square Tower 1 office building - a deal which could have been Singapore's largest office transaction ever.
In an announcement made on the Singapore Exchange website early on Wednesday morning (Nov 4), CapitaLand said that the parties involved have ceased negotiations, but that it would "continue to explore opportunities which fit in the group's strategy and the terms of which allow the group to generate the required returns".
Bloomberg had previously reported that the deal valued Asia Square Tower 1, which is owned by asset manager BlackRock and which counts Citigroup and Swiss private bank Julius Baer among its tenants, at more than S$3.5 billion.
Mr John Saunders, head of Asia-Pacific for BlackRock Real Estate, said talks with other parties are still in progress.
“Asia Square is a trophy grade-A office building in Singapore, often considered as one of Asia’s best such developments, and negotiations with potential buyers of this asset continue," said Mr Saunders.
"While we are not in a position to comment on the details, we are pleased to have received significant global interest in this high-quality asset and are currently working to achieve the best outcome for our investors.”
Property consultancy Chestertons said the failure to close the deal reflects the reluctance of sellers to lower prices, despite weakening office rentals as new supply enters the market.
"The market will see some standstill in terms of the transactions, mainly because we are now entering in a second quarter of drop in terms of rentals. So it hasn't hit the market yet, at least in terms of the sellers," said Mr Donald Han, managing director at Chestertons.
"Sellers are still looking at historical high prices, in anticipation that the rentals they achieved, peak rentals from one to two years ago, would continue to filter through. So I think it would probably take about six to 12 months after we see a continuous drop in terms of prices. I think there will be more negotiation in terms of the seller's point in terms of pricing. Then you will start to see more deals transacting," he added.
On Oct 14, CapitaLand had confirmed that it and other parties were in talks to buy the 43-storey building, but added at the time: “As negotiations with the vendor of Asia Square Tower 1 and the other parties on the terms of the potential transaction are still ongoing, there is no certainty or assurance that any transaction for Asia Square Tower 1 will materialise or that any definitive or binding agreement will result from such negotiations."
On Wednesday, the property developer also reported its third-quarter earnings, with profit after tax and minority interests of S$192.7 million, up 48.3 per cent from the same period a year ago.
Group revenue increase 17.1 per cent in the quarter, which CapitaLand attributed to higher contributions from development projects in China offsetting lower revenue from projects in Singapore and Vietnam.
Sales in China more than doubled year-on-year, with the 2,422 units sold generating about S$800 million.