Keppel REIT finally clinches shareholder approval for MBFC Tower 3 acquisition

KREIT will be forking out $725m.

Keppel REIT (KREIT SP) yesterday obtained approval from its unitholders for its proposed acquisition of a one-third interest in Marina Bay Financial Center Tower.

According to OSK DMG, The acquisition has a consideration of $1.25b ($2790 psf), inclusive of rental support of amounting to SGD49m. Excluding rental support, the acquisition price works out to $1.2b, or $2,680 psf.

“Adjusted for net liabilities of SGD538m in the acquired vehicle, Keppel REIT would be forking out SGD725m for the latest acquisition. It is funding the purchase from a combination of new units to be issued to the seller Keppel Land, a recently completed placement, the balance of proceeds from its recently-divested Prudential Tower, as well as bank borrowings,” noted OSK DMG.

After the acquisition, Keppel REIT’s gearing will spike up marginally to 43.8%. But its high gearing will be redeemed by the fact that it will have the youngest office portfolio among its peers with the average age of its properties at just aroung 5 years.

Occupancy at MBFC Tower 3 has climbed to 96%, with passing rent of SGD9.00 psf per month, while the rental support will lift this to SGD10.40-10.80psf. Current signings are a “SGD11-13 psf. Keppel REIT recently reported 3Q14 results, with quarterly DPU declining 6.1% YoY due to expiry of rental support from MBFC 1 and 2 as well as higher borrowing costs. All eyes are now on OFC to hit its breakeven rent, when its income support ends in 2016-2017,” stated the report