Keppel REIT to buy HK Land’s one-third stake in MBFC Tower 3 at $1.45 billion

SINGAPORE – Keppel REIT is acquiring an additional one-third interest in Marina Bay Financial Centre (MBFC) Tower 3 for an agreed property value of $1.45 billion, the manager of the REIT announced on Dec 11.

The seller is Sageland, a subsidiary of Hongkong Land Holdings.

To fund the acquisition, the real estate investment trust (REIT) has launched an underwritten non-renounceable preferential offering to raise gross proceeds of around $886.3 million.

DBS, OCBC and UOB have been appointed as the joint bookrunners and underwriters for the offering.

Upon completion of the deal, expected on Dec 31, Keppel REIT’s interest in the property will increase from one-third to two-thirds.

The REIT had acquired its initial one-third interest in the property from its sponsor, Keppel Land. The remaining one-third stake in the tower is held by DBS Bank.

Preferential offering

Under the preferential offering, entitled unit holders will be offered 23 new units for every 100 existing units held. The issue price is fixed at 96 cents per new unit.

This issue price represents a discount of around 6.8 per cent to the volume weighted average price of $1.0301 per unit for all trades on the Singapore Exchange on Dec 10.

The offering is expected to open on Dec 26 and close on Jan 9. The new units are expected to be listed on Jan 19.

Units of Keppel REIT were halted from trading before the stock market opened on Dec 11. They closed the previous day at $1.03.

About $875.6 million, or 98.8 per cent of the gross proceeds, will be used to partially finance the acquisition. The remaining $10.7 million, or 1.2 per cent, will be used to pay estimated fees and expenses incurred in connection with the offering.

Rationale and outlook

The manager described the acquisition as a “strategic opportunity” to deepen the REIT’s presence in Singapore’s Central Business District.

Post-completion, Keppel REIT’s portfolio exposure in Singapore will increase from 75.8 per cent to 79 per cent. The enlarged portfolio value will rise to about $11.2 billion.

“The exercise of our pre-emptive right to acquire the incremental one-third share of MBFC Tower 3 presents a rare opportunity to increase our interest in an iconic asset in the prime Marina Bay area, with potential for future rental upside and capital appreciation over the long term,” said Mr Chua Hsien Yang, chief executive of the manager.

The manager cites strong office market fundamentals in Singapore, including improving occupier confidence, cooling inflation and easing global macro uncertainty in its positive outlook.

It also noted that there are no new office projects expected in the Marina Bay area between 2026 and 2029, which could result in a “prolonged drought” of new supply, potentially supporting rental growth.

Ownership background

MBFC was originally jointly developed by a consortium comprising Hongkong Land, Keppel Land and Cheung Kong Holdings.

Following the development’s completion, Keppel REIT acquired its initial one-third interest in the property from its sponsor, Keppel Land. The remaining one-third stake, currently held by anchor tenant DBS Bank, was acquired from Cheung Kong Holdings’ share of the building.

THE BUSINESS TIMES