KepLand in the spotlight: After Equity Plaza, what's next to sell?

Keppel Land determined to hold its stake in MBFC Tower 3.

After a successful divestment of a non-core asset, Keppel Land is not in a rush to sell its stake in Marina Bay Financial Centre Tower 3. But that shall only hold true until and unless somebody named a price that is hard to resist.

"Keppel Land is holding its one-third interest in Marina Bay Financial Centre Tower 3 for long-term investment. If any party, including Keppel REIT, were to make us an attractive offer, we will evaluate and decide according to the merits of such an offer," Keppel Land spokesperson told Singapore Business Review.

Keppel Land, alongside its partner Equity (CP) Private Limited, announced yesterday that it has entered into an agreement to divest Equity Plaza for a cash consideration of S$550m.

The buyer of the 22-year old building is a consortium comprising Sam Goi's listed entity GSH Corp, TYJ Group (private vehicle of Sam Goi) and Vibrant Group (formerly known as Freight Links).

The consortium said the purchase is both for rental returns and capital gains from an expected subsequent sale of the property on a strata-titled basis.

Equity Plaza sits on a 99-year leasehold site, with a remaining tenure of 74 years. Floor plates are 10,000 sq ft per floor, which is not a Grade A specification.

OCBC Research analyst Eli Lee estimates that the S$550m price translates to S$2,181 psf of net lettable area, a decent level in her view and is anticipated to result in a divestment gain of S$59.5m and cash proceeds of S$195.3m to Keppel Land for its 65% stake in Equity Plaza.

MayBank KimEng analyst Wilson Liew says that the SGD2,181 psf is 62.8% higher than their previous estimate of SGD1,340 psf and hence made it an attractive selling price for the vendors.

"Based on an estimated monthly passing rent of SGD7.50 psf, this translates to an NPI yield of barely ~3%. The sale would raise our RNAV estimates for Keppel Land by SGD0.09 per share to SGD6.22," he added.

Wilson believes that the Sale of MBFC Tower 3 is next in line.

"We are positive on the sale as Equity Plaza is a non-core asset and allows Keppel Land to book a net gain of SGD59.5m and receive net proceeds of SGD195.3m. On the heels of Keppel REIT’s (KREIT) recent sale on Prudential Tower for SGD512m, we believe that it is highly likely that Keppel Land will next divest its one-third stake in MBFC Tower 3 (valued at SGD1.1b) to KREIT in 2H14," he said.