CapitaLand and its partners have sold their stakes in Chevron House (formerly known as Caltex House) at Raffles Place

CapitaLand and its partners have sold their stakes in Chevron House (formerly known as Caltex House) at Raffles Place in a deal that values the leasehold office block at $730 million or $2,780 per square foot of net lettable area.

This sets a new record for an entire office building, surpassing the $2,650 psf set earlier this year for the freehold 1 Finlayson Green. Chevron House stands on a site with a remaining lease of about 81 years.

Market watchers are wondering if a new record price will soon be achieved, possibly for Hitachi Tower next to Chevron House and in which CapitaLand also has a 50 per cent stake.

The 999-year leasehold Hitachi Tower, which faces Collyer Quay, was earlier reported to have attracted a top bid of $3,200 psf of net lettable area, following an expression of interest exercise.

However, industry talk now is that negotiations with the top bidder may have met with some hitches - although it is suggested that this does not necessarily mean the deal is off. ‘It could just mean that negotiations may now be open with the other bidders,’ one observer said.

When contacted, a CapitaLand spokeswoman said: ‘The owners of Hitachi Tower are negotiating with several parties to divest their interests, and we will make the appropriate announcement if any definitive agreement has been signed.’

CapitaLand owns Hitachi Tower jointly with National University of Singapore.

The property giant declined to identify the party to whom it and its partners have sold their stakes in Chevron House. But it is believed to be a foreign fund.

‘Globally, in the real estate investment market, it is the international funds that are buying, because that’s where the capital is being raised. And you have a whole variety of investors - including private equity, savings (including pensions), professional investment groups,’ an industry player said.

Jones Lang LaSalle is understood to have brokered the sale of Chevron House.

CapitaLand owns a 50 per cent stake in Chevron House, with IP Property Fund Asia and NTUC Income Insurance Co-operative each holding 25 per cent. The three parties own their stakes in Chevron House through Savu Properties Ltd and under yesterday’s deal, are selling their stakes in this company.

The completion date of the sale is Sept 24. ‘Upon completion, CapitaLand will recognise in its group consolidated accounts a gain of approximately $150.8 million,’ the group said yesterday.

The average prime office capital value rose 117 per cent year-on-year in the second quarter of this year to $2,500 psf, while average monthly Grade A office rental value in Q2 this year was $13.10 psf, up 92.6 per cent from the same period last year, according to CB Richard Ellis data.

Source : Business Times - 31 Aug 2007