K-REIT Asia has acquired Ocean Financial Centre (OFC) from Keppel Land for more than S$2 billion.
The deal sees K-REIT’s aggregate leverage level rise about two percentage points to 41.6 per cent.
OFC is currently 80 per cent occupied with some existing leases at lower-than-existing market rental rates due to the global financial crisis.
To sweeten the deal, Keppel Land has promised rental support of up to S$170 million until end-2016 for K-REIT to fall back on.
K-REIT describes itself as “fortunate” to be offered the price for the acquisition of 87.5 per cent interest in OFC for 99 years along with the support agreed upon.
Keppel Land has a 46.4 per cent stake in K-REIT.
At S$2,600 per square foot, the OFC acquisition is not exactly cheap.
K-REIT Asia chief executive officer Ng Hsueh Ling said: “This is a fresh 99-year lease from the date of completion. This is quite unlike the rest of the other normal sales of sites, where you take about four years to complete the building. (And) what you get – after getting the building stabilised for one year – is probably 94 years or less (lease). Here, you are going to get a fresh 99 years (lease), and the S$2,600 per square foot (or) the S$2.013 billion includes S$170 million of income support.”
Source : Channel NewsAsia – 17 Oct 2011