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K-Reit deal comes with 5.2% guaranteed returns

Posted on 2 Sep 2009 | Comments Off

K-REIT Asia’s acquisition of six floors at Prudential Tower for about $106.29 million comes with income support from the seller that will translate to a guaranteed 5.2 per cent net property yield. The acquisition, which will be funded entirely by debt, will be yield accretive to K-Reit, the trust’s manager said yesterday.

The trust’s aggregate leverage will increase from 27.6 per cent to 31.1 per cent. The purchase will also boost K-Reit’s share of Prudential Tower’s strata area from about 44 per cent to 73 per cent. APF Property Investments, which sold the space to K-Reit under the latest deal, has agreed to provide K-Reit up to $5 million in rental income support over a five-year period. The FY2008 proforma net property income (NPI) attributable to the acquisition is $5.5 million,
inclusive of the income support. If the actual NPI is less than the guaranteed NPI, the seller shall pay the difference to K-Reit’s trustee. ‘The 5.2 per cent per annum property income yield is within the market norm and would provide accretive distributable income,’ K-Reit said. Continue reading →

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Posted in Office / Retail / Industrial

Tagged Office Space, Singapore Office

6 floors of Prudential Tower being sold

Posted on 1 Sep 2009 | Comments Off

K-Reit said to be buying space at about $1,550 psf of net lettable area.

IN a deal that could help benchmark office values in the Raffles Place area and smooth the way for more office investment transactions, a property fund is said to be selling six floors at Prudential Tower for about $1,550 per square foot or about slightly over $100 million.

Back in the fold: KepLand group is buying back the property at a lower price than what it sold the space for 13 years ago — FILE PHOTO

The buyer in the deal being stitched together is believed to be listed K-Reit Asia, which already owns 44.4 per cent of the strata area in the 30-storey building at the corner of Church and Cecil streets.

Prudential Tower is on a site with a remaining lease of about 85 years. Jones Lang LaSalle is said to be brokering the latest sale involving net lettable area (NLA) of about 67,000 sq ft.

As at the end of last year, K-Reit’s existing space at Prudential Tower was valued at $224 million, or $2,066 psf based on 108,436 sq ft NLA.

So the price of $1,550 psf that K-Reit is expected to pay for its latest acquisition of six floors is about 25 per cent lower than the end-2008 valuation on its existing space.

Some market watchers described the latest pricing as ‘not unreasonable’. Continue reading →