Keppel REIT offloads Singapore office tower for US$396m

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Singapore-listed Keppel REIT has agreed to sell its strata ownership of the Bugis Junction Towers in Singapore for S$547.5m (US$395.5m), reflecting a 3% yield for the office complex.

Bugis Junction Towers (image: Keppel REIT)

The 15-storey asset has been acquired by Singapore-incorporate company Village Prop. Pte. Ltd., however the Business Times reports that the main buyer is a fund managed Angelo, Gordon & Co.

The sale realises capital gains of about S$378.1m, as part of Keppel REIT’s ongoing portfolio optimisation strategy.

“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,” said Paul Tham, CEO of the REIT’s manager.

The grade-A office building was built in 1994 and offers almost 250,000 sq.ft. of net lettable area.

The fully-let asset is occupied by Enterprise Singapore, InterContinental Hotels Group and other tenants with a weighted average lease expiry (WALE) of 6.2 years, as of end-June 2019.

Keppel REIT has held Bugis Junction Towers since 2006, providing asset-level returns of 19.4% annually over the period.

The sale price is represents a 6.3% premium above its August 2019 valuation and a 243.2% premium to its 2006 purchase price of S$159.5m.

“We will continue to seek strategic and higher yielding acquisitions in our current geographies of Singapore, Australia and South Korea,” said Tham.

“We believe that quality assets across different markets provide greater income stability and opportunities for growth in the long term.”

The deal is scheduled to close in Q4 2019. Once the divestment is completed, the REIT’s S$7.9bn portfolio will hold nine assets across Singapore, Australia and South Korea.

The transaction follows Keppel REIT’s purchase of the T Tower office in Seoul’s CBD from investment manager PGIM Real Estate for KRW 252.6bn (US$221m) in April this year.