AXA Tower deal amid ongoing market uncertainty demonstrates trust in tech expansion
E-commerce giant Alibaba recently agreed to acquire a 50 percent stake in Singapore’s AXA Tower, a sign that technology and e-commerce companies are well positioned to weather the COVID-19 pandemic.
Alibaba Singapore announced on Wednesday that it would buy half of the S$1.7 billion landmark from a Perennial-led consortium of investors. Once completed, the two companies will form a new joint venture to redevelop the Grade-A office building having already received approval under the CBD Incentive Scheme which Singapore launched last year.
Amid ongoing market uncertainty related to the coronavirus pandemic, technology and e-commerce companies have become essential providers of goods and services across Asia Pacific.
“As a result of increased demand for their services and strong capital positions, tech and ecommerce giants have remained active in their expansion and investment plans, with global gateway cities like Singapore proving an attractive destination for deployment,” says Regina Lim, Head of Asia Pacific Capital Markets Research, JLL.
The AXA Tower deal is the first office acquisition that Alibaba has made outside of China and a further example of tech expansion into south-east Asia.
Singapore is home to some 80 of the top 100 global tech companies and more than 4,000 home-grown and international start-ups from around the world, making the city the Asian capital of technology and entrepreneurship.
In November last year, Dyson became the latest high profile entrant to the country with the announcement of a new site at the historic St James Power Station, near Sentosa, for its new global headquarters.
The acquisition serves as a confidence boost for the Singapore market as investment in real estate markets around the world dips in response to the ongoing COVID-19 pandemic.
Commercial real estate investment across Asia Pacific in the first quarter was down by 26 percent year-on-year, though this is relative to a record level in Q1 2019, while investment in Singapore itself was down 60 percent over the same period.
“Investors have remained optimistic throughout this uncertain environment and stayed active in their pursuit of core assets in Singapore. This transaction will reaffirm investor appetite for CBD assets,” says Ting Lim, Head of Capital Markets, Singapore, JLL.
Singapore’s globally renowned stable policy regime, innovation eco-system and sustainability initiatives have served to solidify the city state’s status as a gateway hub in the region.
Demand is set to continue as the government maintains its commitment to developing the tech sector, rolling out recent initiatives such as Singapore’s National AI Strategy and the appointment of Digital Industry Singapore, to help grow the sector.
JLL on May 6 announced that it acted as the real estate advisor to Alibaba Singapore, part of Alibaba Group Holding Limited, in its 50% share purchase agreement (SPA) of AXA Tower from Perennial Real Estate Holdings Limited (“Perennial”) through Perennial Shenton Investors Pte. Ltd, a Perennial-led entity comprising a consortium of investors.
Under the terms of the SPA, Alibaba Singapore will acquire a 50% stake in Perennial Shenton Holding Pte. Ltd, which indirectly owns AXA Tower, and the transfer of 50% of the shareholders’ loan outstanding, based on an agreed property price of S$1.68 billion.
“Investors have remained optimistic throughout this uncertain environment and stayed active in their pursuit of core assets in Singapore. This transaction will provide a confidence boost to the Singapore market and reaffirm investor appetite for CBD assets,” said Ting Lim, Executive Director, Head of Capital Markets, Singapore, JLL.
AXA Tower, located at 8 Shenton Way, is a grade-A office development in Singapore’s central business district with 50 stories and an attached podium of retail space. AXA Tower currently has an existing gross floor area (GFA) of approximately 1.05 million square feet. It has received approval from the Urban Renewal Authority further to increase its GFA to 1.55 million sq ft to integrate hotel and residential usage under the CBD Incentive Scheme.
Alibaba Singapore will complete the AXA Tower deal around June 2020, subject to all transaction conditions being fulfilled. Upon completion, the company will also enter into a new joint venture with Perennial Newco, a consortium of investors including Perennial, with an equity interest in AXA Tower, to redevelop the property. Alibaba Singapore currently serves as an anchor tenant of AXA Tower.
“Amid ongoing market uncertainty related to the COVID-19 pandemic, technology and e-commerce companies have become essential providers of goods and services across the region. As a result of increased demand for their services and strong capital positions, they have remained active in their expansion and investment plans, with global gateway cities like Singapore proving an attractive destination for deployment,” said Regina Lim, Head of Asia Pacific Capital Markets Research, JLL.
Mr Paul Ho, chief mortgage consultant at iCompareLoan said, “the AXA Tower deal shows that the entire economy is moving towards tech adoption and the trust of investors in the viability of this sector. Covid-19 will only accelerate the technoligical disruptions.”
He added, “At the end of the day, purchase of commercial and office units in the CBD district will present an attractive proposition to investors anticipating companies and working professionals readying to position themselves for a business upturn in a post-COVID environment. But the outlook for the property sector in the near-to-mid term is still very unclear and investors and buyers should exercise extreme prudence. They must do their own research and analyse if they will be getting the best bang for their buck.”
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