ARA, Chelsfield Say Sale of Singapore’s LazadaOne Heading into Final Stages

ARA, Chelsfield Say Sale of Singapore’s LazadaOne Heading into Final Stages thumbnail

LazadaOne Singapore

ARA and Chelsfield recently completed upgrades to the building once known as 5One Central

ARA Asset Management and Chelsfield Asia are officially opening their office project in Singapore’s Bras Basah area this week, with top executives from the two firms confirming that the building now known as LazadaOne is the target of offers from global investors eager to gain access to the newly upgraded property in one of Asia’s hottest real estate markets.

“We have strong interest in the asset from a selection of investors,” Chelsfield Asia chief executive officer Nick Loup said in an exclusive interview with Mingtiandi before the holiday. Without specifying pricing details, he added that offers were being fielded “from global investors looking at core to other substantial professional investors from the region as well,” while noting that the sale was nearing a final result.

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Just last week, Alibaba-owned e-commerce provider Lazada opened its new headquarters in the 11-storey building opposite Singapore Management University at 51 Bras Basah Road, with sources familiar with the sales process indicating that Chelsfield and ARA are asking for S$800 million ($588 million) for the asset.

That pricing backs up media reports that surfaced last year, with Loup confirming that the partners have engaged property consultancies JLL and Savills to market the 260,000 square foot (24,155 square metre) asset after signing up Lazada and Alibaba to a lease of more than half of that space in January of last year.

Tech Drives Demand

Since Lazada and Alibaba first committed to leasing 140,000 square feet in the building at the fringe of Singapore’s downtown core ARA and Chelsfield have attracted a number of tech companies to the property, with music streaming giant Spotify, fashion retailer Zalora and shared space provider JustCo among the tenants that have helped bring the occupancy to 95 percent.

That leasing demand can be attributed in part to upgrades made by the partners after acquiring what was then the Manulife Centre in 2019 for S$555.5 million, particularly enhancements to environmental controls and efficiency systems that enabled the asset to receive a Platinum certification under Singapore’s Green Mark system for sustainable buildings.

“The bigger tenants usually have bigger requirements so if a building is not green, it will significantly affect the pool of potential tenants,” ARA Asset Management head of investments Wilson Lai said in the same interview. “Tenants are also becoming more cognizant of the fact that office buildings with well designed technology can save cost in the long run.”

In addition to boosting sustainability, Chelsfield and ARA, which purchased the property as 50: 50 partners, invested in renovating the public areas and redesigning the lower floor space to allow for direct connection between the Circle Line’s Bras Basah MRT station and the Downtown Line’s Bencoolen station through the building.

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The building’s reported S$800 million price tag translates to around S$3,077 per square foot of built area and represents a 44 percent mark-up from the 2019 purchase price. At the time that Lazada and Alibaba agreed to their lease it was reported that they would be paying around S$8 per square foot per month.

A representative from Savills declined to comment on the sales discussions, while JLL did not respond to queries by the time of publication.

Bright Prospects Ahead

Aside from recent improvements at the asset level, Loup said that LazadaOne has benefited from a rebounding Singapore office market as the city opens up after two years of pandemic restrictions.

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“The first quarter results are positive and we’re expecting a similar momentum for the rest of the year,” he said. “The overall macroeconomic outlook is good, the micro property market outlook here is very promising, and the relaxation of COVID travel restrictions, [these] are all individual drivers of a very positive outlook for Singapore.”

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Beyond the improving macroeconomic situation, ARA’s Lai pointed to the growing importance of Singapore’s innovation economy as creating fresh demand for office space.

“For tech-based occupiers, we are seeing that they are increasingly looking at Singapore as a hub for innovation and in Singapore, we are in a unique position as a highly connected and globalized city, which makes it an ideal location for businesses with APAC presence to set up their headquarters here,” he said.

Hunting for Value-Add Openings

ARA’s marketing of LazadaOne puts the fund manager in line for another Singapore office exit following its January 2020 sale of 61 Robinson Road which came within 19 months of the firm’s purchase of that Tanjong Pagar area asset.

Wilson Lai, director of investments at ARA Asset Management

Wilson Lai, director of investments at ARA Asset Management

After taking in $315 million from its September 2021 sale of that 20-storey office block, Lai said ARA – which in January become part of ESR – will look for opportunities to implement its value-add investment approach regionwide, with an emphasis on acquiring older buildings which can be improved through asset enhancement without requiring redevelopment.

“Real estate is our business, of course we will be (looking) within the market, specifically for opportunities like 61 Robinson Road and Lazada One where what we’ve done is replicable. There’s a sufficient supply of brown buildings in APAC and we’re excited about the opportunities, not just specific to Singapore,” Lai said.

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