A property fund managed by Keppel Land unit Alpha Investment Partners is said to have inked a deal to acquire a half stake in 78 Shenton Way from a global fund managed by Commerz Real, a fully owned unit of Germany's Commerzbank. The transaction values 78 Shenton Way at $608 million, or $1,686 per square foot (psf), on net lettable area (NLA) of around 360,500 sq ft.

BT understands the deal is through a sale of 50 per cent of shares in the company that owns 78 Shenton Way. The CommerzReal fund will halve its stake in that company to 50 per cent. 78 Shenton Way is on a site with a remaining lease of about 70 years. It comprises two towers: the original 34'storey tower with about 283,000 sq  ft NLA, completed in 1988; and a six'storey new tower built above the carpark podium, completed in late 2009. The new block has NLA of about 77,500 sq ft.

In late 2007, CommerzReal paid $650.78 million for 78 Shenton Way, inclusive of the six'level new tower that was being built at the  time by the vendors  '  a joint venture between Credit Suisse and CLSA funds.

The price was reported to be inclusive of about $16 million in income support and a return on the new tower while it was being developed, paid by the vendors to CommerzReal. 78 Shenton Way is said to be about 90 per cent occupied. The average monthly passing rent from existing tenants is around $6 '7 psf for the older tower and $8'9 psf for the newer one. Based on these 'gures, the net yield would be close to 4 per cent based on Alpha's acquisition cost.

Tenants at 78 Shenton Way include Chartis, Shimizu, IPP Financial Advisors and Executive Ship Management. We believe that the transaction presents a bargain. With o'ce building in the vicinity in the region of low S$2,000 psf, it represents a discount of circa 20% even though it is slightly further away from Tanjong Pagar MRT station.