[SINGAPORE] Keppel Reit has struck an agreement to sell its 92.8 per cent stake in Prudential Tower for $512 million - or nearly $2,316 per square foot based on the 221,080 sq ft net lettable area - to a consortium comprising KOP Limited, Lian Beng Group, KSH Holdings and Centurion Global.
The price reflects a net yield of about 3.5 per cent based on the current income generated by the space.
Market watchers say the sale will renew speculation that Keppel Reit will acquire its sponsor Keppel Land's one-third stake in Marina Bay Financial Centre Tower 3.
The Reit has received an initial deposit of $25.6 million and completion of the sale is expected to be on Sept 26.
Located near Telok Ayer and Raffles Place MRT stations, the 30-storey Grade A office building is on a site with a remaining lease term of about 81 years.
The space transacted is on Level 1 and Levels 10-29 (except part of Level 16).
Prudential Tower is already a strata-titled property but Lian Beng executive chairman Ong Pang Aik told The Business Times last night that the consortium members do not plan to split the floors among themselves. "Whatever we do, we'll do together as a group. We will keep some of the space for recurring rental income and also do some strata sales," he said.
Lian Beng has 32 per cent share in the consortium, KSH 28 per cent, KOP 25 per cent, and Centurion 15 per cent.
Centurion Global, controlled by former UOB-Kay Hian star stockbrokers Han Seng Juan and David Loh, is the parent of Singapore Exchange (SGX)-listed Centurion Corporation.
The buyer was introduced to the vendor by CBRE.
Keppel Reit said that the sale price is 4.5 per cent above the last April 28 valuation of its 92.8 per cent interest. It also represents a 46.7 per cent premium over Keppel Reit's original purchase price of $349.1 million.
"A substantial amount of the sale proceeds will be used to repay existing debt to provide Keppel Reit with greater financial flexibility, with the remaining amount to be used for general corporate and working capital purposes and/or for pursuing acquisition opportunities," Keppel Reit said in a release. Prudential Tower is a 16-year-old building which is currently fully occupied. It will be Lian Beng's first major commercial property investment in the Central Business District.
Keppel Reit said in its SGX filing that among the principal terms, the buyers will reimburse the contributions made by Keppel Reit as subsidiary proprietor of Prudential Tower (prior to the sale) towards the costs of certain upgrading or retrofitting works carried out by the management corporation based on an agreed formula less certain agreed deductions.
The Reit expects to recognise an estimated gain on the sale of about $9 million over the book value of $490 million as at Dec 31, 2013. Had the transaction been completed on Jan 1, 2013, the Reit's distribution per unit for the year ended Dec 31, 2013, would have been trimmed from 7.88 cents to 7.67 cents.
Assuming the divestment had been completed on Dec 31, 2013, the Reit's aggregate leverage at the same date would have been trimmed from 42.1 per cent to 38.8 per cent, assuming $425 million of the sale proceeds is used to repay borrowings.
Source: Business Times, 16 May 2014