KREIT, Suntec – BT

K-Reit, Suntec Reit buy stake in ORQ

Both trusts will pay $941.5m for one-third share each


K-Reit Asia and Suntec Reit have each agreed to buy a one-third stake in downtown office complex One Raffles Quay (ORQ). Both the real estate investment trusts (Reits) will pay $941.5 million each.

K-Reit will acquire its stake from its parent company Keppel Land. In a separate statement, KepLand said it will see a net gain of $221.6 million from the sale. Suntec Reit’s one-third stake will come from Hong Kong billionaire Li Ka-shing’s Cheung Kong Holdings. The remaining one-third stake in ORQ will continue to be owned by Hongkong Land, BT understands.

The three partners – KepLand, Cheung Kong and Hongkong Land – paid $462 million in total, or $290 per square foot (psf) of gross floor area, in 2001 to take equal stakes in the 99-year leasehold project. With the sales of their respective stakes, both KepLand and Cheung Kong will be exiting the ORQ investment.

On the other hand, the acquisition is expected to boost the portfolio sizes of both K-Reit and Suntec Reit substantially. For K-Reit, the purchase will more than double its portfolio size to $1.62 billion, from $677 million at end-2006, the trust said. Suntec Reit’s total assets under management would also increase to $4.8 billion, from $3.9 billion at present.

K-Reit said that its purchase will come with an income support of up to $103.4 million till 2011. Suntec will also receive rental top-up payments of $103.5 million (inclusive of GST) over 54 months, it said.

The two Reits also said they are looking at ways to finance their acquisitions. K-Reit plans to issue new units as well as look into debt financing, it said.

In line with this, KepLand, which held 40.7 per cent of K-Reit as at July 27, said that it will subscribe for new units in the Reit to maintain its proportionate stake.

Suntec Reit is also now reviewing financing options for its ORQ stake, including issuing new units, loans, convertible bonds and/or other debt securities.

On its part, KepLand managing director Kevin Wong said that the developer will continue to ‘unlock value in our investment buildings to re-deploy resources to grow our property development business and fund management activities in Singapore and the region’.

Located in the Marina Bay area, ORQ comprises two office towers with a net lettable area of about 1.3million square feet. The complex is fully let, and major tenants include ABN Amro, Barclays, Credit Suisse, Deutsche Bank, Ernst & Young and UBS.

Suntec Reit’s shares closed one cent up at $1.86, while K-Reit’s stock climbed four cents to close at $2.84. KepLand’s shares rose 10 cents to end the day at $8.40.