Keppel REIT to Add Southern Singapore Tower to Portfolio for $492M

Singapore’s Keppel REIT on Wednesday said it had entered into an agreement to acquire a 100 percent stake in Keppel Bay Tower, an office building in the city-state’s HarbourFront area, from Keppel Land Ltd, as the trust seeks to capitalise on the buzz surrounding development of the Greater Southern Waterfront urban living project.

The REIT will pay S$657.2 million ($492.4 million) for the 18-storey office tower which will value the 2002-vintage asset at S$1,700 per square foot.

“The proposed accretive acquisition of Keppel Bay Tower is part of our ongoing portfolio optimisation efforts to enhance the REIT’s distributions and improve total unitholder returns,” said Paul Tham, chief executive of Keppel REIT Management Ltd. “This is also consistent with our strategy of strengthening and diversifying the REIT’s portfolio, while staying focused on our core markets.”

Fringe Benefits

In a press release issued Wednesday, Tham said the addition of the asset, which measures 386,600 square feet (35,916 square metres) by net lettable area, would give the REIT a quality CBD-fringe office property with an established tenant base, complementing the existing portfolio and increasing income resilience.

The building, which includes a six-storey podium block in addition to its office floors, underwent a revamp in recent years, including refurbishment of the office lobby with modern fittings and quality finishes. The work was completed in 2019. Occupancy is 99.2 percent from 29 tenants, including Keppel Group, BMW Asia, Mondelez International, Pacific Refreshments and Syngenta.

Keppel Bay Tower stands within the realm of the Greater Southern Waterfront, an initiative to transform an area stretching from Pasir Panjang to Marina East into a new “downtown south” with recreational amenities and planned housing. Nearby landmarks include the Keppel Club golf course, the Singapore Cable Car’s HarbourFront station and the tourist-attracting Sentosa island.

The Greater Southern Waterfront will “respond sensitively” to the area’s existing context and topography, according to the Urban Redevelopment Authority. Keppel REIT’s CEO was quick to play up his acquisition’s eco-friendly credentials.

“Keppel Bay Tower will further augment Keppel REIT’s green footprint,” Tham said. “It is also in line with our environmental target of reducing energy usage and carbon emission intensity levels.”

The energy-efficient technologies at Keppel Bay Tower include a high-efficiency air distribution system, a cooling tower water management system, integrated sensor technology to optimise fresh air intake, smart LED lighting solutions and an intelligent building control system for energy and water usage.

Eleventh Asset

After the Keppel Bay Tower acquisition, Keppel REIT’s portfolio will grow to S$9 billion in assets under management from S$8.4 billion at present. The existing ten assets are a mix of three high-profile properties in downtown Singapore, six Australian projects and the T Tower office building in Seoul.

The portfolio’s top-valued asset is Keppel REIT’s interest in Marina Bay Financial Centre, a mixed-use development comprising three office towers and an underground mall. The REIT’s 33.3 percent stake in the asset is worth close to S$3 billion.

For Keppel Land, the sale of Keppel Bay Tower marks the second big divestment since Keppel Group announced a management reshuffle to take effect in mid-February 2021.

Earlier this month, Keppel Land said it would divest of its remaining 30 percent interest in Dong Nai Waterfront City in Vietnam for S$115.9 million. The transaction followed the divestment of Keppel Land’s 70 percent stake in the newly developed township to Nam Long Investment Corporation in 2019.

The incoming leadership at Keppel is tasked with carrying out the group’s Vision 2030 plan, which focuses on key sectors including environmental sustainability and asset management — including the “recycling” of capital from divested properties into higher-returning assets.