CCT – BT

CCT acquires Twenty Anson for $430m

IN its first major purchase since the start of its portfolio reconstitution strategy, CapitaCommercial Trust (CCT) yesterday said it had acquired Twenty Anson for $430 million, or $2,121 per square foot (psf) of net lettable area.

To ensure a stabilised net property yield of 4 per cent per annum, CCT will set aside a ‘yield stabilisation sum’ of $17.1 million to be drawn upon over the first 3.5 years. This brings the total purchase consideration, via issued and paid-up share capital of First Office – a special-purpose vehicle (SPV) which owns Twenty Anson – to $446.6 million, taking into account adjustments for First Office’s net liabilities.

The acquisition will be funded using CCT’s existing cash facilities from its divestment of Robinson Point and Starhub Centre in 2010, and bank facilities. No issue of equity or rights units is required.

The acquisition is expected to generate an annualised distribution per unit (DPU) of 0.36 cent.

Comparing the property’s average passing rent of $6.18 psf per month and the current market rate of $8.44 psf per month in the Tanjong Pagar area, there is significant rental upside potential when the leases are renewed, of which 94 per cent are expiring in 2013 and 2014 – when new office supply in the CBD will be well below the historical 19-year average (from 1993 to 2011) of 1.3 million sq ft, noted Lynette Leong, chief executive officer of CCT Management Ltd.

‘Although the high proportion of lease expiries in 2013 and 2014 could expose CCT to tenancy risk for the property, Moody’s believes the well-located and good-quality property, as well as the trust’s strong reputation as an office landlord, would mitigate such a risk,’ said Moody’s in a report.

OCBC said in a report: ‘Given the reasonable price paid, we view this acquisition positively but see little accretive to RNAV at this juncture.’ It maintains a ‘buy’ call on CCT, with an unchanged fair value estimate of $1.29.

AmFraser analyst Lau Wei Chong said the price tag on the building was ‘not cheap, but quite fair’, given that the building is relatively new. ‘Going forward, CCT will probably be beefing up its portfolio of commercial assets. Looking at the situation now, rental rates for older buildings are under pressure, so CCT will also need to renew its portfolio.’

The 20-storey Grade A office tower sits on a site with a remaining lease of about 95 years. It was sold by LaSalle Investment Management and Lum Chang Development Group. Jones Lang LaSalle was the adviser for the deal.

As part of CCT’s reconstitution strategy, the trust has been undertaking asset enhancement works to Six Battery Road, and is developing its Market Street Car Park site into a Grade A office tower, CapitaGreen.

Upon completion, the acquisition of Twenty Anson will increase CCT’s total asset size to $6.9 billion.

CCT’s counter was the top traded property counter yesterday, gaining one cent to close at $1.17.