Keppel REIT Said to Seek Sale of Singapore Prudential Tower

Keppel REIT (KREIT), the second-biggest

office property trust in Asia excluding Japan, is seeking buyers

for its 30-story Prudential Tower in Singapore’s financial

district, according to two people familiar with the matter.

Keppel REIT owns a 92.8 percent stake in the tower, which

was valued at S$490 million ($384 million) as of Dec. 31 by

independent valuers, according to the company’s filing on Jan.

20. The property is fully occupied, the report showed.

“Keppel REIT does from time to time receive interest to

acquire our properties,” the trust said in an e-mailed response

to Bloomberg News queries yesterday. “We will consider all

potential divestments and acquisitions, and will make an

announcement if and when any such deals materialize.”

The Singapore real estate investment trust is seeking to

sell the building after the city’s office rents increased about

1.3 percent last year following a 1.3 percent decline in 2012,

according to government data. Leasing rates in the central

business district bottomed last year and are set to increase in

2014 and 2015, property brokerage Cushman Wakefield Inc. said

in a report last month.

Keppel REIT’s shares fell 1.3 percent to S$1.13 as of 9:20

a.m. in Singapore trading, set for its lowest close since August

2012. The benchmark Straits Times Index (FSSTI) lost 0.2 percent.

The REIT is looking to sell older assets to help fund

acquisitions, Chief Executive Officer Ng Hsueh Ling told

reporters on Jan. 20. The REIT may approach Keppel Land Ltd.,

its biggest shareholder, to buy Keppel Land’s stake in the

city’s Marina Bay Financial Centre Tower 3, she said.

New Acquisitions

“Keppel REIT is looking to sell assets so it will have to

raise significantly lower equity to fund new acquisitions,”

said Vikrant Pandey, an analyst at UOB Kay Hian Pte in

Singapore. “If they get a good price, then the asset sales,

revaluation gains and debt will minimize the equity raising

needed for funding a possible acquisition of a stake in Marina

Bay Financial Centre Tower 3.”

The acquisition of the building in the Marina Bay area, the

city’s new financial center, could be funded by debt, Singapore-based analysts Kai Yip and Regina Lim at Standard Chartered Plc

said in a note to clients on Jan. 21.

“We believe KREIT could fund a potential S$1.24 billion

acquisition from its sponsor with 100 percent debt if it divests

Prudential Tower for S$490 million,” they said.

Price Tag

Keppel REIT is seeking S$2,400 a square foot for Prudential

Tower, one of the people said, declining to be identified as the

information is private. The price would value the trust’s stake

at S$531 million, based on the 221,241 square feet of space it

owns in the building, according to the filing on Jan. 20.

Tenants include Prudential Assurance Co. and UniCredit Bank

AG, according to the trust’s website.

Singapore office rents may rise 10 percent over the next

two years, property brokerage DTZ Holdings Plc said in a

statement on Jan. 13. Capital values for offices rose by an

average 3.6 percent in 2013, the broker said.

Keppel REIT has a market capitalization equivalent to $2.5

billion, making it the biggest office REIT in the region after

CapitaCommercial Trust, which said last week it expects rental

growth to accelerate in the second half.

To contact the reporter on this story:

Pooja Thakur in Singapore at

pthakur@bloomberg.net

To contact the editor responsible for this story:

Andreea Papuc at

apapuc1@bloomberg.net

Keppel REIT Said to Seek Sale of Singapore Prudential Tower