UPDATE: Mapletree Commercial Trust to acquire Mapletree Business City (Phase 2) for S$1.55 billion

Singapore’s VivoCity mall, owned by Mapletree Commercial TrustSingapore’s VivoCity mall, owned by Mapletree Commercial Trust

This article was originally published on Friday, 27 September 2019 at 8:41 A.M. SGT; it has since been updated with more details.

Mapletree Commercial Trust has entered a deal to acquire Mapletree Business City (Phase 2) from Mapletree Investments’ subsidiary Heliconia Realty for S$1.55 billion, the REIT said in a filing to SGX Friday.

Sharon Lim, CEO of the trust’s manager, said MBC II offers companies an alternative to the central business district at almost half the rental cost.

“Since its completion, it has benefited from both decentralisation and flight to quality trends – tenants such as Google, Covidien and Pfizer
have consolidated their operations, expanded their footprints cost-effectively, or relocated to the property in pursuit of higher quality space,” she said in the statement. “These trends, together with the limited upcoming supply of business parks, will continue to support the property’s occupancy and rent.”

She added the deal gave the REIT control over the entire Alexandra precinct, providing economies of scale. She also pointed to benefits from the government’s plans to develop the nearby Greater Southern Waterfront, as the port is relocated.

The deal will be financed by new loan facilities of up to S$800 million and the net proceeds from issuing up to 500 million new units in an equity fund-raising, the trust said.

The equity fund-raising will include a private placement of new units to institutional and other investors and/or a preferential offering of new units to existing unitholdings, the filing said. The structure, timing and pricing haven’t yet been determined, it added.

MBC II is expected to be acquired at a net property income (NPI) yield of around 5.0 percent, above Mapletree Commercial Trust’s existing portfolio NPI yield of around 4.7 percent as of end-March, the statement said.

On a pro forma basis, the distribution per unit (DPU) would be 9.51 Singapore cents for the financial year ended 31 March, assuming the deal had been completed on 1 April 2018, compared with 9.14 Singapore cents reported for the period, marking a 4 percent accretion, the filing said.

The property, located at 10, 20, and 30 Pasir Panjang Road in Singapore, has around 1.2 million square feet of total net lettable area and includes four blocks of business park space as well as a carpark, multi-purpose hall and retail area, the trust said.

MBC II has a committed occupancy of 99.4 percent as of end-August, the trust said. Around 53 percent of the business park tenants have relocated from the CBD, the filing said.

One block is 30 storeys, while the others have eight, six and five storeys, while the carpark has two storeys, the filing said.

Mapletree Commercial Trust said the deal will require the approval of unitholders at an extraordinary general meeting.

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