BlackRock Said to Explore Sale of Second Singapore Tower

(Bloomberg) -- BlackRock Inc., the world’s largest asset manager, is exploring a sale of its second office tower in Singapore’s central business district, people with knowledge of the matter said.

BlackRock has started reaching out to potential buyers to gauge their interest in Asia Square Tower 2, according to the people, who asked not to be identified as the information is private. The development could fetch about S$2 billion ($1.4 billion), the people said.

Asia Square Tower 2 sits on the site next to Tower 1, which the Qatari sovereign wealth fund agreed to buy in June from BlackRock for S$3.4 billion in Singapore’s biggest office transaction. The 46-story Tower 2, spread over 784,100 square feet (72,845 square meters), includes office space as well as a Westin hotel. The building has an occupancy rate of over 90 percent at the end of October, according to Cushman & Wakefield Inc. 

“Asia Square is a trophy grade-A office building in Singapore, often drawing keen interests from high-quality tenants,” John Saunders, head of Asia Pacific for BlackRock Real Estate said in an e-mailed response to questions. “We are not in a position to discuss our plans for Asia Square Tower 2, while the strong 91 percent occupancy rate speaks to the premier status of the asset. We will continue to focus on achieving the best outcome for our investors.”

Office transactions in Singapore have been picking up this year, with CapitaLand Commercial Trust agreeing in May to buy 60 percent of the CapitaGreen tower in the central business district for S$393 million. Investment company MYP Ltd. the next month said it plans to offer S$560 million for the Straits Trading Building. The government is also selling prime land in the Marina Bay financial district, the first such sale in nine years.

Landlords Compete

The increased deal activity is happening against the backdrop of rising supply and falling rents. Singapore’s office vacancies rose to the highest in more than four years and rents slid 1.1 percent in the quarter ended Sept. 30. Prices of office space decreased 0.4 percent in the quarter compared with a 1.5 percent decline in the previous three months, according to data from the Urban Redevelopment Authority.

Competition among landlords is set to intensify as supply in premium and Grade A properties in the central business district expands, according to Colliers International. Prime office rents in the central business district are expected to drop 7 percent to 12 percent this year, the broker said.

Asia Square is owned by MGPA, which was acquired by BlackRock in 2013. MGPA developed the two towers on two adjoining plots it won in 2007 at government land auctions.