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Manulife said to be doing due diligence on PWC Building

23 May, 2017

PWC Building at 8 Cross Street could be in the early stages of a potential sale. BT understands that insurer Manulife has been selected to do exclusive due diligence for the purchase of the 28-storey building, which has a net lettable area (NLA) of 355,704 sq ft.

PWC Building, which is owned by DBS, is on a site with a balance lease term of 78.5 years. The price is expected to be more than S$700 million. According to information in DBS's 2015 annual report, PWC Building was independently valued at S$711 million at the end of last year; this works out to S$1,999 psf on NLA. Talk in the market is that Manulife was selected to do due diligence following a private expression of interest exercise conducted on behalf of DBS. When contacted on Thursday, a spokeswoman for the bank declined to comment.

Manulife did not respond to BT's queries by press time but sources say it is looking at a part occupation/part investment strategy for the building, which is at the corner of Cross and Telok Ayer streets. Manulife operates at a few locations on the island, but principally at Manulife Centre at Bras Basah Road.

Analysts say the Canadian insurer is keen to boost its physical presence in Singapore's financial district - in sync with the increased market share it is eyeing in Singapore following its 15-year exclusive bancassurance partnership with DBS which kicked in on Jan 1 this year. What makes PWC Building a good acquisition for Manulife is that close to half of the building will be vacated when anchor tenant PricewaterhouseCoopers (PwC) moves to Marina One, where it has signed a lease for around 180,000 sq ft.

Manulife is said to occupy around 90,000 sq ft at Manulife Centre and its lease runs out in late-2017. Manulife Financial Advisers operates out of VisionCrest Commercial. Some of the group's agencies are located elsewhere including Kallang.

Moving into 8 Cross Street would help Manulife keep up with the competition, who all have visibility in the financial district. Prudential is just a stone's throw away at its namesake tower (although it will be moving to Marina One); AIA Tower along Robinson Road is also nearby. NTUC Income reaps great brand-presence through its ownership of Income at Raffles at 16 Collyer Quay - although its headquarters are at Income Centre at 75 Bras Basah Road, near Manulife's headquarters.

Market watchers note that the Canadian insurer used to have a limited market share in Singapore before strengthening its multi-distribution strategy through a bancassurance deal with DBS starting this year. Under the agreement, Manulife pays DBS S$1.6 billion over 15 years in exchange for letting it sell life and health insurance products to the bank's more than 6 million retail, wealth and SME customers in Singapore, Hong Kong, China and Indonesia.

Singapore office rents are soft but offices have posted a stellar performance on the investment sales scene this year.

The tally for office deals originating from the private sector stands at S$7.3 billion, up from S$4.9 billion in 2015. The major deals this year include Qatar Investment Authority's acquisition of Asia Square Tower 1 (S$3.38 billion), CapitaLand Commercial Trust's purchase of the remaining 60 per cent stake in CapitaGreen (S$960 million) and Indonesian tycoon and philanthropist Tahir's purchase of Straits Trading Building in Battery Road for S$560 million (to be completed later this month). Other sizeable deals include the S$530.8 million acquisition of 77 Robinson Road by CLSA Capital Partners and the sale of the office tower at Mapletree Business City Phase 1 (S$471.9 million). Alpha Investment Partners recently sold its half stake in Capital Square to ARA Asset Management for S$475.5 million (the deal values the entire building at S$951 million or S$2,450 psf).

Meanwhile, interest could have fizzled out at One George Street, where China Life Insurance and Haitong Securities were earlier carrying out due diligence.

PWC Building was developed jointly by DBS and the former DBS Land (which later merged with Pidemco Land to form CapitaLand). DBS bagged the 99-year leasehold site for S$367.31 million or S$800 per square foot per plot ratio at an Urban Redevelopment Authority tender that closed in January 1996. It later teamed up with DBS Land to develop the site through a 70:30 tie-up; the total development cost was estimated at S$1,500 psf.

Last year, CapitaLand divested its 30 per cent stake in the the company that owns PWC Building to DBS. According to a stockbroking house report at the time, the deal priced the property at close to S$1,892 psf. The building had 97 per cent committed occupancy at the time.

Adapted from: The Business Times, 9 December 2016