Its trustee has entered into a "put and call option" with a unit of Mapletree Investments to buy the assets at Mapletree Business City (Phase One).
The purchase price represents a discount of about 2.6 per cent to the average of independent valuations conducted by Knight Frank and DTZ Debenham Tie Leung (SEA), said MCT's manager, Mapletree Commercial Trust Management.
Acquisition-related expenses will lift the total cost to about $1.86 billion, it added yesterday.
The price is second only to the $3.4 billion Qatar Investment Authority paid BlackRock for Asia Square Tower 1 in June.
MCT will fund the purchase through a combination of debt and equity, with the trust manager proposing to issue up to 795 million new units.
Ms Sharon Lim, chief executive of the trust manager, said: "The addition of the property will increase our NPI (net property income) and further enhance MCT's tenant and income diversification."
The property, which was completed in 2010, boasts a strong tenant base, including HSBC, Samsung Asia, Unilever Asia and SAP Asia.
Mapletree Business City (Phase One) in Pasir Panjang Road is one of the largest integrated office and business park complexes in Singapore, with a total net lettable area of more than 1.7 million square feet.
It has a committed occupancy of 99 per cent, with a weighted average lease to expiry of 3.5 years, the trust manager added.
The acquisition is expected to contribute a net property income yield of about 5.6 per cent without any income support, higher than MCT's existing portfolio yield of 5.1 per cent. It is also expected to boost distribution per unit and net asset value.
"We believe that the property is an appealing and cost-efficient alternative to the CBD properties, and will continue to benefit from decentralisation and flight-to-quality trends in the office market," Ms Lim added yesterday.
Analysts told The Straits Times that the asset is a "good buy", owing to its location, the long lease tenure that runs up to Sept 29, 2096, and the healthy yield.
CBRE head of research for Singapore and South-east Asia Desmond Sim said: "Business parks generally kick up the yield a bit more because their capital values are slightly lower. The rents are quite competitive, especially in this city fringe location."
Mr Andrew Lim, managing director and head of South-east Asia real estate and hotels at HSBC, called the deal "a transformative opportunity" for MCT, noting that the property is in the Alexandra precinct, which is a "resilient and popular micro-market with multinational corporations and leading government agencies".
RHB Research Institute analyst Ivan Looi noted that MCT's gearing ratio should "stand comfortable" at 38.4 per cent, assuming $860 million of the cost is funded by debt. MCT's gearing ratio was 35.1 per cent at the end of March.
The proposed deal announced yesterday will bump up MCT's portfolio asset size to $6.1 billion.
The acquisition is subject to approvals from MCT's unitholders and a successful equity fund raising. MCT units closed five cents down to $1.46 yesterday, after the announcement of the acquisition.
Source: Straits Times, 6 Jul 2016