Mapletree Commercial Trust (MCT) is proposing to buy a business park in Pasir Panjang at an agreed property value of S$1.55 billion from Heliconia Realty, a direct wholly-owned subsidiary of Mapletree Investments, MCT’s sponsor.
If completed, this could count as one of the largest acquisitions by a Singapore real estate investment trust (S-Reit) this year. S-Reits have in recent weeks been on an acquisition binge with billion-dollar purchases, amid a lower-for-longer interest rate environment.
MCT said on Friday that its trustee and a subsidiary, 80 Alexandra Pte Ltd, have entered into a conditional share purchase agreement for the proposed acquisition of the property through the purchase of shares of Mapletree Business City Pte Ltd.
The property comprises Mapletree Business City (Phase 2) (MBC II) located at 40, 50, 60, 70 and 80 Pasir Panjang Road in Singapore, as well as the common premises at 10, 20 and 30 Pasir Panjang Road.
It has a total net lettable area (NLA) of 1.2 million square feet (sq ft) and comprises four blocks of business park space as well as the common carpark, multi-purpose hall, retail area and common property of Mapletree Business City Development (MBCD).
The 2.8-hectare property is a premium campus-style workplace, with eco-friendly features and a comprehensive suite of recreational and lifestyle amenities. Its tenants include multinational corporations such as Google, Covidien and Pfizer.
The acquisition will consolidate MCT’s ownership over the entire development of MBCD, which also comprises Mapletree Business City (Phase 1) (MBC I), a four-block office and business park complex at 10, 20, and 30 Pasir Panjang Road already acquired by the trustee from the sponsor in 2016.
For the proposed acquisition, the agreed property value of S$1.55 billion was arrived at after taking into account the two independent valuations of the property by CBRE and Savills Valuation and Professional Services (S).
Including acquisition-related expenses, the total acquisition cost is around S$1.58 billion, which MCT plans to fund through a combination of debt and equity. The equity fundraising may comprise a private placement and a preferential offering, to issue up to 500 million new units in MCT. The balance of the acquisition cost will be funded by drawing down new loan facilities totalling up to S$800 million.
The acquisition is subject to approvals from MCT unitholders at an Oct 15 meeting and a successful equity fundraising. Details of the equity fundraising, including the issue price of new units, will be announced later.
MBC II had a committed occupancy of 99.4 per cent as at Aug 31. It also has stable and growing cashflows, as 97 per cent of the leases by NLA have average annual rental step-ups of about 2.3 per cent, said MCT’s manager in a bourse filing on Friday.
The property is expected to be acquired at a net property income (NPI) yield of about 5 per cent, which is higher than MCT’s existing portfolio’s NPI yield of 4.7 per cent.
Therefore, the proposed acquisition is expected to increase MCT’s pro forma distribution per unit (DPU) and net asset value (NAV) per unit by 4 per cent and 2.2 per cent respectively.
It will also complete MCT’s control over the entire Alexandra Precinct, which is formed by MBCD and PSA Building, also owned by MCT. The Alexandra Precinct spans 13.5 hectares near the central business district.
“This gives MCT greater economies of scale and flexibility in meeting tenant space requirements,” Sharon Lim, chief executive officer of MCT’s manager, said on Friday.
Units of MCT closed at S$2.36 on Thursday, up three cents or 1.3 per cent.