CICT and Coref to acquire Grade-A office building on Robinson Road for S$1.3b

CAPITALAND Integrated Commercial Trust (CICT) C38U and CapitaLand Open End Real Estate Fund (Coref) have entered into an agreement to acquire a Grade-A office building at 79 Robinson Road for S$1.3 billion.

The purchase will be done by acquiring 70 per cent and 30 per cent respectively of the shares of the property holding company Southernwood Property Ptd Ltd, CICT and Coref said in a bourse filing on Friday (Mar 25).

Southernwood Property is a special-purpose vehicle in which CapitaLand Investment Limited (CLI) - which manages Coref - owns a 65 per cent stake. The wholly-owned subsidiaries of Mitsui & Co and Tokyo Tatemono hold the remaining 35 per cent as part of the joint venture.

After the acquisition is completed, Southernwood Property will be converted to a limited-liability partnership (LLP), said CICT and Coref.

"Immediately upon completion, we will convert that entity (Southernwood Property) into an LLP so that we are able to continue to enjoy tax transparency, like most real estate investment trusts (Reits) are able to enjoy," siad Tony Tan, chief executive officer of the manager of CICT, at a briefing following the announcement.

The acquisition is expected to be completed in Q2 2022.

The agreed property value, negotiated on a willing-buyer-willing-seller basis, is S$1.3 billion or S$2,423 per square foot, in line with independent valuations.

It has a net property income yield of 4 per cent, based on pro forma estimates.

CICT plans to fund its share of the acquisition with a combination of divestment proceeds from the sale of shopping mall JCube and debt. Its aggregate leverage would be about 41 per cent, and the acquisition is expected to generate a distribution per unit accretion of 2.9 per cent.

Coref is CLI's newly established regional open-end fund that provides global investors with long-term strategic exposure to a diversified portfolio of institutional grade, income-producing assets across developed markets in the Asia-Pacific.

The acquisition will mark Coref's first acquisition in Singapore and its third asset after investing in 2 properties in Japan.

The Grade A office building is a 29-storey property with a net lettable area of 519, 949 square feet. It has a remaining land tenure of around 45 years and a committed occupancy of 92.9 per cent as at Dec 31, 2021.

Its weighted average lease expiry is 5.8 years and office tenants include multinational companies from various sectors such as banking, legal, insurance and financial services as well as media and telecommunications.

The property is the newest Grade-A office building with ancillary retail space in the Tanjong Pagar area in Singapore. It is also near the upcoming Greater Southern Waterfront, a planned mixed-use district with residential, recreational and workspaces.

Following the acquisition, some 92 per cent of CICT's assets will be in Singapore, with another 4 per cent in Germany and the remaining 4 per cent in Australia.

"It's still a very heavily Singapore-centric concentration, which is what a lot of investors are asking for," Tan said.

Tan noted that the Reit is inclined to continue to add to its Singapore properties. "There are still opportunities in Singapore that we are assessing," he said.

He added that CICT "will not rule out" further collaboration with Coref in future.

"There's a lot of similarity in terms of the way we look at investments ... The alignment of interests is very strong," Tan said.

"Coref is one of the options we can look at now. But whether we will partner with Coref depends on many circumstances," he added. "But this first joint venture opens up that possibility."

Units of CICT closed S$0.03 or 1.4 per cent higher at S$2.23, while shares of CLI closed S$0.01 or 0.3 per cent lower at S$3.90, on Friday before the announcement.