“This acquisition reflects our confidence in Singapore’s prime office sector and reinforces our focus to anchor and continue to grow our portfolio of Grade A commercial assets in the market,” he adds.
MBFC Tower 3 has a committed occupancy of approximately 99.5% as at Sept 30 and a weighted average lease expiry of 3.5 years.
The agreed property value represents a discount of 1.0% to the property’s independent valuation of $1.467 billion. The difference of $529.5 million between the purchase price and the valuation is likely to comprise the debt rollover.
The dilution to DPU is 6.4% if the blended interest cost of debt is 3.3% a year, and the dilution is 3.6% if the blended interest cost is 2.2%. Keppel REIT’s 1HFY2025 DPU was 2.72 cents, giving an annualised DPU yield of 6.94%.
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To fund the acquisition, Keppel REIT has launched an underwritten non-renounceable preferential offering of new units to raise some $886.3 million. Keppel REIT’s unitholders will be offered 23 new units for every 100 existing units held, at 96 cents per unit. This represents a discount of 6.8% to the undisturbed unit price as of Dec 10.
Post-completion of the transaction, Keppel REIT will hold a two-thirds interest in MBFC Tower 3. Keppel REIT acquired its initial one-third stake in MBFC Tower 3 for an agreed value of $1.248 billion in 2014.
Keppel REIT’s announcement says that it received three pre-emptive notices on Nov 21 from subsidiaries of Hongkong Land:
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Sageland in relation to the sale of one-third of MBFC Tower 3;
Sageland in relation to the sale of one-sixth of the interest in MBFC Tower 1 and 2, and Marina Bay Link Mall;
Freyland, in relation to the sale of one-sixth of One Raffles Quay.
The deadline to accept the offers set out in any of the three pre-emptive offer notices is 20 days from the date of receipt of the notices, being Dec 11. The offer has lapsed with Keppel REIT accepting the offer for the one-third stake in MBFC Tower 3.
Keppel, the REIT’s sponsor, together with Keppel REIT Investment, Keppel Capital Investment Holdings and the REIT manager have provided an irrevocable undertaking to subscribe for their respective total provisional allotment of the new units based on their respective entitlements.
Units in Keppel REIT, which were halted for trading before the market opened on Dec 11, closed flat at $1.03 on Dec 10.
For Hongkong Land, the transaction reflects its ongoing strategy to monetise its assets. In September, it sold its residential property developer unit MCL Land to Malaysia’s Sunway for $738.7 million.
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During a media briefing at the time, Michael Smith, group CEO of Hongkong Land, had said: “We’re selling at NAV, crystallising NAV, and we’re buying back our shares at around a 50% discount.” Hongkong Land’s share price closed at US$6.93 ($ 8.97) on Dec 11, a 50.9% discount to the June 30 NAV of US$13.62 per share.
Smith added that some of the proceeds from the sale of MCL Land would be used to “de- gear further our balance sheet so that we can create a war chest for future endeavours and opportunities to grow our ultra premium, integrated commercial product, which we have in Hong Kong, which we’re building in Shanghai, which we have in Marina Bay in Singapore, and looking at further opportunities to deploy capital in that type of ecosystem, in other gateway cities across Asia”.
In October 2024, Smith announced a strategy that involved recycling up to US$10 billion ($13 billion) of existing capital over the next 10 years. An estimated US$6 billion in proceeds was to be generated from the wind-down of the build-to-sell segment. MCL Land’s sale was part of the build-to-sell segment. A further US$4 billion will come from the recycling of selected investment property assets.
In the meantime, Hongkong Land has introduced a new long-term incentive plan for its senior leadership effective from Jan 1. The plan will reward the senior leadership based on total shareholder return across a period of three to five years, measured in both absolute terms and reference to a basket of real estate peers’ TSR (total shareholder return) performance.
On Dec 12, Hongkong Land announced it is setting up its Singapore Central Private Real Estate Fund (SCPREF).
SCPREF is expected to be seeded by Hongkong Land’s Singapore commercial portfolio and other assets acquired by the fund on inception and over time, creating future growth in earnings and assets under management (AUM), as well as introducing a new earnings stream in terms of fee income for the company.
The seed assets are likely to be Hongkong Land’s one-third stake in Marina Bay Financial Centre Towers 1&2, its one-third stake in One Raffles Quay (ORQ) and its 100% stake One Raffles Link.
As of Dec 11, Hongkong Land’s year-to-date total return stands at 62.5%, just second to its peer, Hysan Development at 69.8%, but outperforming the likes of Hang Lung Properties, Sino Land and Sun Hung Kai Properties.
