Keppel REIT Buying Keppel Bay Tower

Keppel REIT Buying Keppel Bay Tower For S$657.2m

SINGAPORE – Keppel REIT has signed a conditional sale & purchase agreement (SPA) to purchase a 100 percent interest in Keppel Bay Tower from its sponsor Keppel Land for S$657.2 million (approx. S$1,700 psf), according to a Singapore Exchange (SGX) filing released on Wednesday morning (23 December, SGT).

“The divestment of Keppel Bay Tower is in line with Keppel’s Vision 2030 and will allow the Keppel group to unlock capital from Keppel Bay Tower and reallocate it to seek new growth opportunities,” said Keppel Land’s President (Singapore) Ng Ooi Hooi.

The selling price took into account independent valuations. Property consultancy JLL appraised the commercial property at $665.0 million (S$1,720 psf), while Cushman & Wakefield (C&W) valued it at S$667.3 million (S$1,726 psf).

Located in Singapore’s world-class Keppel Bay waterfront precinct that is part of Singapore’s highly-anticipated Greater Southern Waterfront, Keppel Bay Tower consist of an 18-storey Grade A office tower and a 6-storey podium block, which have an overall net lettable area (NLA) of 386,600 sq ft. Of this, 2,701 sq ft is ancillary retail space, while 383,899 sq ft is composed of office premises.

As of 30 September 2020, the commercial property has a committed occupancy level of 99.2 percent and weighted average lease expiry (WALE) of 3.3 years. It has a diverse mix of 29 tenants, including Keppel Group, BMW Asia, Mondelez International, Pacific Refreshments, and Syngenta. Despite the COVID-19 pandemic, the landlord was able to collect about 99 percent of the rent during the third quarter.

“This [proposed accretive acquisition] is consistent with our strategy of strengthening and diversifying the REIT’s portfolio, while staying focused on our core markets. The strategic addition of a quality CBD-fringe office property such as Keppel BayTower, with its established tenant base, complements our existing portfolio and increases income resilience,” commented the CEO of Keppel REIT’s manager, Paul Tham.

The development was completed in 2002 and it was recently renovated in 2019. It stands on a land parcel with a 99-year leasehold tenure expiring on 30 September 2096.

On 9 December, Keppel Bay Tower was certified as Singapore’s first Green Mark Platinum (Zero Energy) commercial building by the Building and Construction Authority (BCA). In January 2020, the property was also named as the country’s first commercial project to use renewable power for its entire operations.

“Featuring the latest in green building technology, Keppel Bay Tower will further augment Keppel REIT’s green footprint,” added Tham.

The acquisition, which is expected to be completed by Q2 2021, will be financed with debt and proceeds from an equity fund raising via a private placement.

Post-acquisition, Keppel REIT’s portfolio will mainly comprise prime CBD properties, as 11 percent of its assets under management (AUM) will consist of non-CBD office buildings. AUM is also expected to increase to S$9.0 billion across 11 properties in key commercial hubs in Singapore (77.8 percent), Australia (18.9 percent), and South Korea (3.3 percent). Portfolio WALE by NLA will also remain long at about 6.5 years, while occupancy rate will remain high at 98.2 percent.

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