ADIA May Divest Its Entire Stake in Singapore’s PLQ

Abu Dhabi Investment Authority (ADIA), the UAE’s state-owned investor which owns 70% of the Singapore’s Paya Lebar Quarter (PLQ), is planning to divest its entire stake, according to a report in Australian Financial Review (AFR).

Confirming this in an interview with AFR, Lendlease Group’s CEO Tony Lombardo said that his company was working with ADIA to divest PLQ Mall.

PLQ Mall comprises 340,000 sq. ft. of retail space according to its website. The mall was opened in 2019, suggesting that it was likely to be approaching its second lease cycle. The retail leasing cycle is around 2-3 years.

According to the AFR report, ADIA would like to sell its entire 70% of PLQ – which comprises three office towers and PLQ Mall. Lendlease Group owns the remaining 30% of PLQ.

ADIA, a long-term partner in Lendlease’s O’Connell Street precinct – a 6,737 sq. m. site in central Sydney with a planned 72-storey, 309 metre tower – wants to exit that investment.

Lombardo suggested that ADIA should wait till the office market has recovered. Interestingly, rents and capital values of the Singapore office market, in particular Grade A office buildings in the CBD, have stayed resilient compared to other gateway cities such as Hong Kong, London and New York.

Market watchers point to Bedok Mall’s capitalisation rate of 4.6%, and its capital value of more than $2727 per sq. ft. as a guide to PLQ Mall’s valuation. This would place PLQ Mall’s valuation above $780 million.

ADIA Changed Tack

“ADIA’s changed tack a little bit around their strategy. With the O’Connell project going through council planning processes, now is a good time for ADIA to sell,” Lombardo told AFR.

“They didn’t want to put the future capital up for development. And there’s a number of interested parties. We think that will make a great location for further development,” he said.

ADIA, like many investors do, changed its investment strategies – in this case from holding to selling assets – and Lendlease was now working with ADIA to sell the shopping centre adjacent to Singapore’s MRT Paya Lebar rail station, Lombardo said.

While the Abu Dhabi sovereign wealth fund (SWF) also wanted to sell the three office towers, at a time of falling interest rates, Lendlease was encouraging ADIA to wait until the office market had recovered, he said.

“What we have said to them is we believe there’s value in the office to continue to hold because we are seeing positive rental reversion that in the last 12 months alone, the office rental reversions have been over 10% here, and there are low incentives. So that’s adding value to the future of the assets,” he explained.