It eyes a gain of $67m from the sale.
Frasers Commercial Trust (FCOT) sold 55 Market Street, a 16-storey commercial property in Raffles Place, for $216.8m or $3,020 psf. It expects to gain $76.5m from the sale.
According to an announcement, the price represents a 44.5% premium above the property’s value of $150m and almost thrice the original purchase price of $72.5m in 2006. DBS Equity Research said in a report that the buyer is a fund.
55 Market Street has 15 floors of office space and two floors of retail space on the ground floor and basement level. The property has a total net lettable area of 71,796 sqft and a committed occupancy of 87.9% as at 31 March 2018.
The property constituted approximately 6.3% of FCOT’s property portfolio value and contributed approximately 3.5% of FCOT’s portfolio net property income for the quarter.
The sale consideration implies an annualised net property income yield of 1.7% based on the net property income of 55 Market Street.
FCOT CEO Jack Lam noted that 55 Market Street is the smallest of their assets and is non-core.
He added, “Monetising the asset at a gain of close to $67m above valuation and almost tripling the initial purchase price unlocks significant value. It also creates opportunities for us to recycle capital to higher-yielding investments and pursue other growth initiatives as we continue to reshape and strengthen the portfolio for long-term growth.”
DBS Equity Research analyst Mervin Song said he is "delighted" that FCOT has been able to achieve a good price for 55 Market Street. "In our view, [this] places the REIT is a very strong position to accelerate its growth plans. This transaction follows the good prices achieved over the past few weeks for office assets in Singapore. These include the sale of Twenty Anson on 2.7% exit yield and potential disposal of Manulife Centre on a mid-2% exit yield."
Song added that FCOT is now in a strong position to recycle the proceeds into the higher yielding UK business park space, which it expanded into with a maiden acquisition of a 50% interest in Farnborough Business Park in late 2017 on a low 6% NPI yield. "This should help temper the loss of income from HP vacating its space at ATP but more importantly accelerate FCOT’s DPU growth profile going forward," he said.
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