One of the Biggest Commercial Sale this Year in 2019
Angelo Gordon & TCRE Partners Became the New Owners
In its continuous and measured quests for portfolio optimization, Keppel REIT announced today (Oct. 1) the divestment of its lowest income contributing asset in Singapore, Bugis Junction Towers at $547.5 million, while reaping capital gains at $378.1 million.
As of FY 2018, while Bugis Junction Towers contributed 16.1 million income, Keppel’s other investments in Singapore, the Ocean Financial Centre, Marina Bay Financial Centre and One Raffles Quay have contributed 93.7 million, 81.0 million and 24.8 million income respectively.
Its previous divestment in Singapore was Prudential Towers in 2014.
Focusing on long term growth, the company has been investing in higher yielding assets across different markets, which includes the South Korean acquisition this year and Australian acquisitions earlier, as reported by the CEO of the Manager, Mr. Paul Tham.
After the present transaction, Keppel’s portfolio will stand at $7.9 billion spread over 81.1% in Singapore (Ocean Financial Centre, Marina Bay Financial Centre and One Raffles Quay), 15.1% in Australia (8 Chifley Square Sydney, 8 Exhibition Street Melbourne, 275 George Street Brisbane, David Malcolm Justice Centre Perth and 311 Spencer Street Melbourne) and 3.8% in South Korea (T Tower, Seoul).
Located at 230 Victoria Street, Bugis Junction Towers is a 15 storey Grade A premium office space of 12 levels from 4th to 15 storeys and two F&B units on the ground floor with Green Mark Platinum Award recognition from the Building and Construction Authority.
It is part of the integrated mixed-use development Bugis Junction, complete with a retail mall and a five-star hotel with direct access to Bugis MRT station.
Built in 1994, it has 70 remaining lease years left until September 9, 2089. It is occupied by prominent tenants like Enterprise Singapore, InterContinental Hotels Group, UCommune, IE Singapore, Infrastructure Asia etc.
The sale price $547.5 million ($2,200 psf) of attributable NLA 248,853 sf, is a clear 6.2% above the market valuation of $515 million ($2,069 psf).
Moreover, it reflects 243.2% above the purchase price of $ 159.5 million, a clear 3.0% yield. Throughout its holding period of 13 years since 2006, the asset has been consistently delivering returns at 19.4% p.a.
The market value of $515 million was arrived through direct comparison, discounted cash flow and income capitalization methods by Savills in August 2019.
The Property Sale Agreement has been signed yesterday (Sept. 30) on a willing-buyer and willing-seller basis and the sale is expected to be completed by year end.
Keppel has been consistently maintaining occupancy rates between 94% to 99% across its portfolios for the entire decade from 2008 to 2018.
Bugis Junction Towers has 100% occupancy rate and 6.2 years WALE (Weighted Average Lease Expiry), ensuring sustainable long term returns to the purchaser.
Cushman & Wakefield is the marketing agent that brokered the deal.
The Asian arm of global alternative investment manager Angelo Gordon and TCRE Partners are known to have their major and minor shares respectively in the consortium.
Shaun Poh, Executive Director is optimistic that more such big-ticket investments are likely in CBD considering the scarce office supply for the next three years with great potential for rental growth during the same period.