SINGAPORE (Oct 1): Keppel REIT is divesting its strata ownership of Bugis Junction Towers, which it has held since its listing in 2006, for a sale price of $547.5 million.
Based on the building’s net lettable area (NLA), this translates to a price of $2,200 per square foot.
The sale price is 6.3% above the latest valuation of $515.0 million as at Aug 8, and 243.2% above the purchase price of $159.5 million in 2006.
Keppel REIT is expected to recognise an estimated accounting gain of some $18.3 million from the divestment.
In a filing to SGX on Tuesday morning, the manager of Keppel REIT says Bugis Junction Towers has delivered asset-level returns of 19.4% per annum over the holding period.
Based on the net property income for the 12 months ending June 2019, the sale price translates to a yield of 3.0%.
The manager says the divestment proceeds will increase its financial flexibility to continue its DPU-accretive unit buy-back programme, fund growth through reinvestments, distribute capital gains, or pare down debt.
Completed in 1994, Bugis Junction Towers is a 15-storey Grade A office building with approximately 70-year leasehold land tenure remaining and close to 250,000 sq ft of NLA.
The development has 100% committed occupancy and a long weighted average lease expiry (WALE) of 6.2 years as at June 30, 2019. Its principal tenants are Enterprise Singapore, InterContinental Hotels Group and UCommune.
Upon completion of divestment, expected in 4Q19, Keppel REIT’s $7.9 billion portfolio will be down to nine premium commercial properties across Singapore, Australia and South Korea.
The REIT’s portfolio committed occupancy will remain at 99.0% while portfolio WALE will remain at 5.2 years.
“The divestment of Bugis Junction Towers is part of our ongoing portfolio optimisation strategy and realises capital gains of approximately $378.1 million. 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% of the portfolio,” says Paul Tham, CEO of the manager.
"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,” he adds.
Units in Keppel REIT closed 1 cent higher, or up 0.8%, at $1.26 on Monday.