FOREIGN institutional investors continue to be drawn to the Singapore office market.

The latest investor to come in is Germany's Commerz Grundbesitz Investmentgesellschaft (CGI) group, which has bought 78 Shenton Way for $650 million, BT understands. The price works out to $1,857 per square foot based on a total net lettable area of about 350,000 sq ft. This comprises about 275,000 sq ft in the existing 34-storey office tower and a further 75,000 sq ft that is being built in an extension that will be spread across six levels of offices above the carpark podium.

The extension is expected to be completed in the second half of 2009.

78 Shenton Way is on a site with a remaining lease of about 75 years. The property was sold by a joint-venture between Credit Suisse and CLSA funds which bought the 34-storey tower this January for $348.5 million.

Sources say that the vendors are expected to pump in about $80 million to build the extension and spruce up the existing property.

Jones Lang LaSalle is said to have advised 78 Shenton Way's sellers, while buyer CGI - which is making its maiden entry into the Singapore real estate market - is understood to have been advised by CB Richard Ellis. CGI is the capital investment company for the open-ended fund Haus-Invest.

The $1,857 psf of net lettable area achieved for the deal is in line with current office values in the area, industry observers say. In April this year, TSO Investment, a unit of a CLSA Capital Partners-managed property fund, sold SIA Building at Robinson Road to European pension fund manager SEB for about $1,780 psf of net lettable area.

In September, SEB also bought 12 floors at Springleaf Tower in the Anson Road area at $2,088 psf of net lettable area.

In October, Allco Commercial Real Estate Investment Trust picked up Key- Point i n the Jalan Sultan/Beach Road area for $370 million or $1,186 psf of net lettable area. The deal includes income support of up to $10.5 million for two years to be provided by the seller.

In August, a Goldman Sachs-linked fund bought Chevron House (formerly Caltex House) along Raffles Place for $2,780 psf, a record for an office block here. Chevron House stands on a site with a remaining lease of about 81 years.

The Goldman Sachs group is also expected to stitch a deal early next year to buy the next door Hitachi Tower, which faces Collyer Quay, for about $3,000 psf, industry observers say. A higher price can be justified for Hitachi Tower due partly to its superior tenure (999-year leasehold) and orientation. As well, Hitachi Tower is not weighed down by rental caps for a major tenant, as in the case of Chevron's lease at Chevron House, which limits the near-term rental upside of the property, according to an earlier media report.

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