Keppel REIT to Buy Singapore Office Stake for S$1.25 Billion

Keppel REIT, the second-biggest office property trust in Asia excluding Japan, will buy a stake in a Singapore office tower from Keppel Land Ltd. valued at S$1.25 billion ($986 million).

The trust agreed to buy a one-third stake in Marina Bay Financial Centre Tower 3 from its sponsor Keppel Land, it said today in a statement. Keppel REIT is seeking to raise S$228 million in a placement by selling units at S$1.17 each and will separately issue S$185 million of new units to Keppel Land, its biggest investor, it said.

Keppel REIT is looking to sell older assets to help fund acquisitions, Chief Executive Officer Ng Hsueh Ling said in January. The office landlord sold its majority stake in the 30-story Prudential Tower for S$512 million in May.

“The acquisition of MBFC Tower 3 and the divestment of Prudential Tower will enhance and transform Keppel REIT’s portfolio in terms of age and quality of assets, as well as improve the portfolio property fundamentals,” Ng was quoted as saying in the statement.

The one-third stake in Marina Bay Financial Centre Tower 3 was valued at S$2,790 per square foot by the two companies. Cushman & Wakefield Inc. estimated the stake’s market value at S$1.281 billion while Savills Plc gave a valuation of S$1.276 billion, Keppel REIT said in the statement.

Increasing Presence

Keppel Land seeks to increase its presence in Singapore, China, Indonesia and Vietnam, Tan Swee Yiow, Singapore president of the company said at a briefing in the city-state today.

Singapore office rents may rise 30 percent during the next two years, according to Christopher Fossick, managing director for Singapore and Southeast Asia at property broker Jones Lang LaSalle Inc. The low supply of office space until 2017 will drive up rents, Fossick said.

Keppel REIT units have gained 3.8 percent this year while Keppel Land shares have risen 1.8 percent. Both were halted from trading earlier today before the announcement.

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