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Royal Group confirms Phillip St buys for $283m

Monday 24 October 2011

Chairman also reveals sale of Royal Brothers Building stake recently was at $3,050 psf

(SINGAPORE) Royal Group, controlled by Asok Kumar Hiranandani and his son Bobby, has bought two adjacent office blocks at Phillip Street in Singapore's Raffles Place financial district for nearly $283 million.

Mr Asok Kumar, who is Royal Group's chairman, confirmed the transactions in a statement issued to The Business Times yesterday. He said that the average price being paid for the two buildings, at 1 and 3 Phillip Street, is about $2,350 per square foot based on their total net lettable area of about 120,000 sq ft. Both buildings are on 999-year leasehold sites.

Mr Asok Kumar also said that 3 Phillip Street, currently known as Commerce Point, will house the new corporate headquarters for Royal Group, which currently operates out of Royal Brothers Building at Malacca Street nearby.

He also confirmed that earlier this month, he sold his 50 per cent share of the Royal Brothers Building, which has a total net lettable area of around 59,000 sq ft, at a price of $3,050 psf. This would suggest that he received close to $90 million for his half share. BT reported earlier that that the transaction was part of a swap of assets between Mr Asok Kumar and his elder brother Mr Raj Kumar under a restructuring of the Royal Brothers group which the two men built up over three decades.

As for Royal Group's purchase of two adjacent office blocks at Phillip Street, although the average price is $2,350 psf, word in the market is that One Phillip Street is being transacted at a higher price than 3 Phillip Street. Both properties are being sold by Aviva group. Jones Lang LaSalle is said to have brokered the sale.

One Phillip Street is a 16-storey building with 36,194 sq ft net lettable area (NLA). The last caveat lodged on the property was in February 2008 for $99.02 million or $2,736 psf.

A unit of Aviva picked up the next door Commerce Point from City Developments in June 2008 for $180.7 million or about $2,200 psf. This is a 19-storey office block with 82,160 sq ft NLA.

Market watchers reckon that over the longer term, Royal Group will likely redevelop the two adjacent office blocks into a single project with a larger floor plate.

Analysts also note that the $3,050 psf pricing for Mr Asok Kumar's stake in Royal Brothers Building would mark a new high in the current office cycle. However, they highlight that the transaction is a related party deal since Mr Asok Kumar sold the stake to RB Capital, which is controlled by his nephew Kishin (Mr Raj Kumar's son).

The highest price ever paid for an office transaction on the island was $3,125 psf in April 2008 for 71 Robinson Road.

Source: The Business Times