CapitaLand Sells Singapore Offices to Pay for Mall Buy

The largest real estate investment trust in Singapore is swapping out glass towers in exchange for luxury storefronts.

CapitaLand Integrated Commercial Trust is selling its stake in the Asia Square Tower 2 office building for nearly S$2.5 billion (almost $2 billion), using the proceeds to help fund a roughly S$3 billion (nearly $2.4 billion) acquisition of the Paragon mall, Bloomberg reported. The shopping property is owned by units of Temasek Holdings, the Singapore state investor that backs CapitaLand. The buyer of CapitaLand’s interest in the office tower is a subsidiary of Malaysia’s IOI Properties Group.

CapitaLand Integrated Commercial Trust will fund the Paragon purchase with proceeds from the office sale, debt and a private placement, pending unitholder approval, per Bloomberg. Paragon, one of the country’s marquee malls, was a crown jewel property for Paragon REIT, which was privatized last year. The aging luxury mall has faced mounting pressure from newly upgraded competitors and softer high-end spending.

Paragon REIT went private while facing an anticipated overhaul of the mall that could cost more than S$300 million (almost $235.5 million). CapitaLand said it will reassess those renovation plans, according to Bloomberg.

The Asia Square Tower office sale appears to signal renewed movement in a sluggish local investment market. Big-ticket office trades have been stalled by a gap between buyer and seller expectations, but the Asia Square deal suggests that gap may be narrowing, at least for trophy assets.

IOI’s acquisition of CapitaLand’s Paragon stake is part of a broader push in the island nation under CEO Lee Yeow Seng. The firm has been steadily assembling a S$10 billion (nearly $7.9 billion) portfolio in the country, including a stake in the South Beach office tower and sites near the Asia Square Tower 2 offices including an office building and a luxury residential development the company is currently building.

— Chris Malone Méndez