PGIM Real Estate close to deals at 108 Robinson Road
The firm’s Asia-pacific head says the office market in Singapore continues to be strong despite companies restructuring and cutting costs
PGIM Real Estate has received firm offers and is close to sealing deals on two floors at 108 Robinson Road, since it began selling strata office space at the downtown office building in March.
“The freehold tenure of the building has received strong interest from discerning small businesses, private wealth and family offices who are keen on long-term wealth preservation,” a PGIM Real Estate spokesman told The Business Times (BT).
Three floors of the freehold building – levels 5, 6 and 8 – were put up for sale at a guide price of S$18.2 million per floor, or about S$3,850 per square foot (psf). Each of the three office floors is about 4,800 sq ft in size.
108 Robinson Road, formerly known as Finexis Building, was acquired by PGIM Real Estate in 2021 as part of a push into Asia. PGIM Real Estate is the real estate investment and financing business of PGIM, the asset management arm of Us-based Prudential Financial.
The acquisition was an “opportunistic (one) that offers numerous asset enhancement exit strategies”, the firm said at the time.
The 12-storey freehold property underwent an extensive revamp which was completed in June 2023. It has a gross floor area of 64,286 sq ft.
PGIM’S assets in Singapore include the Luxasia Building in Paya Lebar ipark and 78 Shenton Way in the Central Business District (CBD).
PGIM acquired 78 Shenton Way in 2018, at a price put at about S$680 million from a fund managed by Keppel-owned Alpha Investment Partners.
The prime office asset comprises two towers with a total gross floor area of 494,375 sq ft. It has a balance lease term of about 58 years.
PGIM is believed to have been attempting to sell the Shenton Way building since 2022.
A Bloomberg report in April said efforts to divest it had stalled as prospective buyers bid below what the real estate manager bought it for.
A PGIM spokesman told BT it is not currently marketing the asset for sale.
He said: “Our focus is on leasing and managing it for which we have experienced strong pick-up in tenant interest.”
“We remain focused on continuing to add value to the asset by leasing it up with good-quality tenants, and active asset management.”
Speaking to BT during an interview in April, Benett Theseira, managing director and head of Asiapacific at PGIM Real Estate, said the office market in Singapore continues to be strong despite companies restructuring and cutting costs.
Office rents in Singapore’s central region fell 1.7 per cent in the first quarter of 2024 after climbing 27.5 per cent over nine consecutive quarters.
He said: “Core (CBD) rents will continue to stay stable and maybe have a bit of upside for higherquality buildings and vacancies remain tight.”
“While secondary CBD locations will be OK, some office buildings in secondary locations are seeing (less) demand and rental weakness.”
PGIM Real Estate has recently picked up assets in Japan and Australia, after raising close to US$1 billion for its Asia-pacific funds in 2021.
Theseira said: “The high interest rate environment and limited liquidity in the market over the last 12 months have resulted in a softening of valuations. For investment funds like us with dry powder, it’s quite an interesting time to be more active in the market as we near the turning of the cycle.”
“Year to date, we completed about US$700 million of industrial and senior living transactions across (the) Asia-pacific for our core plus and value-add strategies, including two well-located logistics assets in Melbourne this month.”
In April, PGIM Real Estate completed a A$66.5 million (S$59.5 million) acquisition of a 37,906 square metre single-storey industrial warehouse in Melbourne. It expects such assets to outperform with rising e-commerce sales and a favourable long-term population growth outlook. Last September, it tied up with a developer for two 300-apartment projects for rent in Sydney and Brisbane.
Theseira said: “One theme we think is quite interesting is co-living. You’re renting a smaller space and it’s more affordable and more efficient. More people can use the same amount of space. That makes the residential model work in expensive cities like Singapore, Hong Kong and Sydney.”
He projects an average net yield on cost of 6.5 per cent and above for PGIM Real Estate’s co-living assets in Australia.
“Interest rates in Australia have moved up quite a lot and that’s impacted valuations across different asset classes – office, retail and logistics. Australia is a market where we think pricing is fairly attractive and over the next few months will be even more attractive. You can’t wait for prices to bottom and we have been actively engaging asset owners and pushing deals in the market,” Theseira said.
In Japan, PGIM made four equity investments across the industrial, living and hospitality sectors in 2024, Theseira said. In December 2023, PGIM Real Estate acquired the Zent Shinsaibashi Building, a prime mixed-use retail and service office building in Osaka, Japan, banking on a retail rebound with the return of tourists.
He said: “Although the expectation is that interest rates will go up slightly, it’s still the market that offers the most attractive spreads and interest rates remain low. The fact that the yen is relatively cheap does make it very interesting to invest in.”
PGIM Real Estate is also betting big on data centres. It employs a
“build-fill-sell” approach, partnering leading data centre operators to build new facilities.
Theseira said: “We fill the centres with hyperscale tenants to maximise occupancy and optimise revenue potential. Once they are established as stabilised properties, we seek to sell the data centres into strong market demand from income-seeking investors like (real estate investment trusts) and private equity firms.”
While PGIM Real Estate had focused on institutional investors for its Asia-pacific real estate equity and debt strategies, in the last two years, it has started making a number of its solutions such as its global data centre strategy available to high-net-worth individuals.
He added: “We are seeing significant demand and supply imbalances across several prime data centre markets as new development is not able to keep up with growing customer requirements. This imbalance creates a compelling investment thesis. These assets are where we see the future.”