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"Keppel Land will buy two properties, Keppel Towers and GE Tower (KTGE), from K-REIT for $573 million for redevelopment into about 620 premium residences."
Keppel Land sells Marina Bay property stake to K-REIT: Update
Monday, 11 October 2010
Monday, 11 October 2010
© 2010 - The Edge Singapore
What does this mean for K-REIT?
On 24 Sep, in "FCOT, CCT and K-REIT", I mentioned that "K-REIT closed at $1.31 today. NAV as of Jun 10 at $1.47. K-REIT is trading at an 11% discount to NAV. Gearing ratio is at 15.2%. This is very attractive to me as it gives the REIT plenty of room to leverage up for potential yield accretive purchases. 1Q 2010 DPU at 1.33c. Annualised DPU should be 5.32c which means a yield of only 4% based on the current price of $1.31. K-REIT has, arguably, the strongest balance sheet amongst the three office property REITs discussed here. The low yield might put off investors but its low gearing paves the way for future acquisitions which could bump up its DPU." Well, it has happened.
Some effects of the swap agreement:
1. The aggregate leverage of K-REIT after completion of the MBFC Acquisition and the KTGE Divestment is approximately 39.1%.
2. K-REIT’s weighted average debt maturity profile will be extended to approximately 4 years. In addition, the portfolio’s average borrowing cost will also be reduced from 3.54% to approximately 3.05%.
3. Weighted Average Lease to Expiry (WALE) from 5.7 years as at 30 June 2010 to 7.8 years.
Read announcement here.
The actual DPU forecast following the completion of the transactions will be disclosed in the Unitholder Circular which is not available yet. Will this swap agreement be DPU accretive? It should be since we are seeing a more than doubling of gearing ratio from 15.2% to 39.1% and a boost to K-REIT’s assets to about $3.4 billion from $2.5 billion.
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