Keppel Land sells 87.5% interest in Ocean Properties

The developer believes the move will enhance its financial position to seize opportunities in a volatile market.

Straits Property Investments Pte Ltd ("Straits Property"), a wholly-owned subsidiary of Keppel Land Limited, has today entered into a conditional share purchase agreement with RBC Dexia Trust Services Singapore Limited ("RBC Dexia") as trustee of K-REIT Asia, for the sale of its approximate 87.5% shareholding interest in Ocean Properties Pte. Limited ("Ocean Properties") to K-REIT Asia for a period of 99 years.

The agreement, negotiated on a willing-buyer and willing-seller basis, has been reached at the consideration of $1,571.3 million (subject to completion and post-completion adjustments). This is based on an agreed value for the property at $2,013.1 million with a rental support of up to $170 million from the completion of the sale to 31 December 2016. This is in line with the independent valuation of $2,010 million by Colliers International Consultancy & Valuation (Singapore) Pte Ltd.

One of Singapore's most cherished landmarks in the Central Business District, Ocean Financial Centre is the fourth in the lineage of buildings to rise on the same site. The 43-storey prime Grade A office building comprising about 884,957 square feet of net lettable area is about 80% leased to blue-chip financial institutions such as Australia and New Zealand Banking Group and BNP Paribas and law firms such as Drew & Napier LLC and Stamford Law Corporation; as well as The Executive Centre and Verizon Communications.

The transaction will yield for Keppel Land a net gain of about $492.7 million upon completion, derived after deducting the book value of the investment and excluding gain arising from the Group's 46.4% in K-REIT Asia. On a pro forma basis, had the transaction been effected on 31 December 2010, the Group's net tangible asset per share would have increased to $3.61 from $2.97 and the Group would be in a net cash position from a net debt/equity ratio of 20%, according to a Keppel Land report.

"This strategic move will enhance Keppel Land's financial position to capture opportunities in a volatile market and take on more development projects in the region to achieve higher returns.

"Moreover, it will enhance K-REIT Asia's position as a key premier office landlord in Raffles Place and Marina Bay with an enlarged assets under management. Keppel Land will continue to grow its fund management business and also enjoy the rental income and potential capital value appreciation of Ocean Financial Centre through its interest in K-REIT Asia," said Mr Kevin Wong, Group CEO of Keppel Land.

K-REIT Asia is proposing a rights issue to partly finance the acquisition. Keppel Land has provided an irrevocable undertaking to subscribe for its pro-rata entitlement of K-REIT Asia's rights units.

This transaction is subject to and conditional upon among others, the approval of the minority shareholders of Keppel Land and that of the minority unitholders of K-REIT Asia at the respective extraordinary general meetings expected on 10 November 2011; as well as from the relevant authorities. Upon approval, the transaction is expected to be completed no later than 31 December 2011.