Office REITs – UOBKH

Continued interest from foreign investors

Germany-based Commerz Grundbesitz Investmentgesellschaft has bought 78 Shenton Way for S$650m or S$1,857psf from a JV between Credit Suisse and CLSA Funds. The property comprises an existing 34-storey office tower with 275,000sf and a 6-storey extension with 75,000sf. The extension is currently under construction and is scheduled for completion in 2H09.

The purchase price is comparable to recent transactions in the vicinity. German pension fund SEB bought SIA Building (renamed Robinson 77) earlier this year for S$1,780psf. SEB also bought 12 floors of office space at Springleaf Tower in the Anson Road area for S$2,088psf.

There is limited supply of office space coming on stream over the next two years (2008 and 2009). We expect to see buying interest for office REITs, such as KREIT, Suntec REIT and CapitalCommercial, given recent steep correction.

Continued interest from foreign interest will also booster share price.