Keppel REIT’s manager has announced the divestment of the REIT’s 50% stake in a property located in Brisbane, Australia for a sale consideration of A$275 million ($278.4 million).
The property, a 31-storey freehold office building located at 275 George Street, was sold to Charter Hall Prime Office Fund (CPOF), which holds the remaining 50% interest in the property. Keppel REIT acquired the property, its first Australian asset, in 2010.
Excluding A$11 million in outstanding incentives, capital expenditures and related costs payable to CPOF, the adjusted consideration of A$264.0 million is 7.8% above the last valuation of A$245 million and 59% above the original purchase price of A$166 million in 2010.
Keppel REIT is expected to recognise an estimated accounting gain of A$9.8 million (or approximately$10 million) from the divestment.
Completion of the divestment is expected in 3Q2021. Upon completion, Keppel REIT’s $8.7 billion portfolio will comprise ten premium commercial properties across Singapore (79.7%), Australia (16.8%) and South Korea (3.5%).
“The divestment of 275 George Street is part of our continuing portfolio optimisation strategy, and will provide us with greater financial flexibility as we seek strategic and higher yielding acquisitions to enhance the REIT’s income resilience and deliver sustainable total return to unitholders,” says Paul Tham, CEO of the manager.
The divestment proceeds will be used to repay debt and transaction costs, prior to redeployment for further growth opportunities.
See also: Analysts divided on Keppel REIT’s 1QFY2021 business update
Assuming the entire amount of adjusted consideration is used to repay debt and related transaction costs, Keppel REIT’s aggregate leverage will be lowered by approximately 1.6 percentage points to 37.8% on a pro forma basis.
The property, which has 41,720 square meters of net lettable area, had a committed occupancy of 90.6% as at March 31. Its principal tenants include Telstra Corporation and the Shell-operated Queensland Gas Company.
Units in Keppel REIT closed flat at $1.18 on June 30.
Photo: Keppel Corp
