Keppel REIT plans to divest Bugis Junction Towers in Singapore to Village Prop for S$547.5 million, 6.3 percent above an August valuation and 243 percent above its S$159.5 million purchase price in 2006, the REIT said in a filing to SGX Tuesday.
Paul Tham, CEO of the REIT’s manager, Keppel REIT Management, said the divestment would realize capital gains of around S$378.1 million. The REIT said it had asset-level returns of 19.4 percent a year from the investment.
The proceed will give the REIT financial flexibility to continue its unit buyback program, make acquisitions, distribute capital gains or reduce debt, the filing said.
“We will continue to seek strategic and higher yielding acquisitions in our current geographies of Singapore, Australia and South Korea. We believe that quality assets across different markets provide greater income stability and opportunities for growth in the long term,” Tham said in the statement.
On a pro forma basis, assuming the deal was completed on 1 January 2018, the distribution per unit would have been 5.52 Singapore cents for 2018, if the proceeds were used to repay loans, compared with 5.56 Singapore cents reported for the year, Keppel REIT said.
The sale price translates to a yield of 3.0 percent, based on the net property income for the 12 months ended 30 June, the REIT said.
Bugis Junction Towers, which has 100 percent committed occupancy, is a 15-storey Grade A office building with around 70 years remaining on its leasehold land tenure, the filing said. The main tenants of the mixed-use property include Enterprise Singapore, InterContinental Hotels Group and UCommune, it said.
After the deal is completed, which is expected in the fourth quarter, Keppel REIT’s portfolio will have nine commercial properties across Singapore, Australia and South Korea, the REIT said.
“Post-divestment, Keppel REIT’s portfolio will remain firmly anchored by our assets in the central business district of Singapore, which account for 81.1 percent of the portfolio,” Tham said.