Keppel REIT agreed to divest 20 percent of its subsidiary, Ocean Properties, which holds a 99.9 percent interest in Ocean Financial Centre, to Allianz Real Estate for S$537.3 million, the REIT manager said in a filing to SGX before the market open on Friday.
That was 16.8 percent above Keppel REIT’s historical purchase price of S$460.2 million, for a 20 percent stake, it said. The independent valuation by Cushman and Wakefield VHS valued the 20 percent stake at S$525.3 million as of 15 November, it said.
Tan Swee Yiow, CEO of the REIT manager, Keppel REIT Management, said in the statement that the capital gain would be around S$77.1 million, or a net asset-level return of 8.3 percent per annum over the holding period.
“The partial divestment of Ocean Financial Centre is a unique opportunity for unitholders to realize part of the capital gains from this premium Grade A office building, while maintaining exposure to the strengthening Singapore office market,” Tan said.
The divestment proceeds provide the REIT manager “flexibility” to continue its unit buyback program, distribute capital top-ups, pare down debt or make reinvestments, it said.
Rushabh Desai, CEO for Asia Pacific at Allianz Real Estate, was positive on the rental outlook for the Singapore office market.
“From an occupational cost and efficiency perspective it continues to be favorable vis-a-vis other comparable markets like Hong Kong,” he said in the statement. “This strategic partnership will also put us in good stead as we look towards exploring future collaborations.”
The remaining 0.1 percent interest in Ocean Properties is held by private entity, Avan Investments, it said.
Keppel REIT, which focuses on commercial real estate and real estate-related assets, has assets under management of over S$8 billion in Singapore and the Australian cities of Sydney, Melbourne, Brisbane and Perth, it said.
Ocean Financial Centre is a grade A office property with direct access to the Raffles Place MRT subway stop in Singapore’s central business district.