ARA Asset Management and Chelsfield Asia complete Lazada One repositioning
Incorporating sustainable elements into real estate assets may feel like a choice today. However, in due time, this will become an increasingly critical factor in how buildings are assessed, says Moses Song, CEO at ARA Asset Management.
This sentiment is shared by Nick Loup, CEO at Chelsfield Asia, who says that from a property development perspective, many international stakeholders and investors have very clear sustainability standards when it comes to investing or developing a new asset.
ARA Asset Management and Chelsfield Asia jointly own Lazada One, an 11-storey Green Mark Platinum office building at 51 Brash Basah Road. The 260,000 sq ft building officially opened its doors on April 20. E-commerce giant Lazada is the anchor tenant. The other key tenants include Spotify, Zalora, Alibaba Group, and co-working operator JustCo, which operates a co-working centre.
Green refurbishment
The building was formerly known as Manulife Centre but was renamed and rejuvenated after ARA and Chelsfield secured a $385.8 million green loan to finance the acquisition and asset enhancement plan for the property in 2020.
“The base design of the building had a lot of potential. This includes having a good-sized floor plate of about 24,000 sq ft, which is unusual for a building of that age and in that location. Thus, it gave us the flexibility to create the new contemporary design we wanted, address any building performance issues and refresh how the building would be used,” says Loup.
Connectivity has also been enhanced with direct access to two MRT stations: Bencoolen station on the Downtown Line and Bras Basah station on the Circle Line. Pedestrian flow on the ground floor is also enhanced with more open spaces, benefiting occupiers and F&B tenants.
A key component in the asset enhancement plan was to incorporate more sustainability-focused design elements and facilities within the building to make it energy-efficient and reduce waste and carbon emissions.
Green features include variable speed water-cooled chiller systems, carbon monoxide sensors in the carpark ventilation system, high-efficiency LED lights in common areas, recycling facilities and electric vehicle charging facilities. The exterior of the building also features strategically-positioned fins that reduce solar radiation by about 30% and keep the building naturally cooler.
“These changes have genuinely transformed the exterior building for the better and the contemporary aesthetic and natural finishes we have also included have improved the building for the better,” says Song.
According to Loup, the approximate cost of the refurbishment was about $50 million. “Together with ARA, we wanted to set high standards for what we wanted to achieve for this project and as a result, the building managed to attain a Green Mark Platinum certification from the Building and Construction Authority.”
Sustainability standards
These days, commercial occupiers look for three important factors when considering a building, says Song. These are functionality, sustainability and aesthetic appeal.
“Therefore, as an asset manager or developer, we make sure that we can meet these needs to drive demand for space in our building,” says Song.
As building managers, he says it is also important to curate the tenant mix carefully, balancing rental demand as well as crafting a community within the building that can appreciate the various sustainability features.
“Tenants in the tech space are in a sector that we feel has longevity and these companies tend to have a similar mindset in terms of their view towards sustainability and they can appreciate the green features throughout the building.”
Repositioning Lazada One as a green and sustainable building also makes it more attractive to a larger pool of high-quality tenants, says Loup. “We are seeing in the market that if you don’t achieve the standards and sustainability targets set by some corporate tenants, you tend to limit the number of interested occupiers and investors.”
He adds that an attractively positioned building like Lazada One with the right type of green features and facilities also translates to relatively faster tenant turnaround time.
“It is difficult to say dollar to dollar what the rental difference is but there is increasing anecdotal evidence that more occupiers place a premium on buildings that hit the right standards and asset quality they are demanding,” says Song.
Tenants have been very receptive to the commercial space offerings at Lazada One. “When you do a comprehensive refurbishment and the right amount of effort into the design as we have done with Lazada One, you’re looking at a 10%–15% rental premium compared to similar buildings in the vicinity,” says Loup.
Exiting the asset
Last December, Lazada One was put up for sale by Expression of Interest and the property was jointly marketed by JLL and Savills. At that time, the indicative price of the property was $800 million or about $3,077 psf based on the nett lettable area.
On April 19, an article by Mingtiandi mentioned that ARA Asset Management and Chelsfield Asia were in the final stages of concluding a deal to sell the recently refurbished property. The article cited unnamed sources who indicated that the joint owners were asking for more than $800 million for the asset.
During their interview with EdgeProp Singapore on April 7, the two company heads did not directly address if they were in any active negotiations to sell the property. Instead, Song says that the building is largely stabilised and officially opened and they have achieved their objectives of the asset enhancement, they would both be looking closely at offers that come their way.
Loup adds that the commercial office market has seen several high-profile sales in the past few months and rents have rebounded on the back of a return to the office in Singapore. “We have finished the process of enhancing the asset and as it sits in a fund, it is natural to start thinking about the right timing for an exit strategy,” Loup says.