Allianz Real Estate has agreed to pay SGD537.3m (€344.3m) for a 20% stake in Keppel REIT’s Ocean Financial Centre building in Singapore.
Rushabh Desai, the CEO Asia-Pacific at Allianz Real Estate, said: “This is our first direct core office exposure to Singapore. Our prior exposure is via funds and co-investment.”
He told IPE Real Assets: “Investment in an income producing prime asset in a market like Singapore, which has a strong rental outlook, brings about a good balance to our office portfolio.”
The €60bn reeal estate manager has been monitoring the Singapore office market for the last two years, looking for an appropriate opportunity. “We started exploring this transaction in second quarter of this year,” he said.
“The acquisition is aligned with our approach of creating a quality portfolio of core assets in 24x7 cities,” said Desai.
He added: “Keppel REIT has built an excellent portfolio and a best-in-class team. We look forward to future collaborations, especially on new transactions, with them.”
The transaction, due to close by the end of December, was done at a 16.8% premium above Keppel REIT’s historical purchase price of SGD460.2m.
Tan Swee Yiow, CEO of Keppel REIT Management Limited, said divestment of the 20% stake was part of the trust’s ongoing portfolio optimisation effort.
“In line with our commitment to deliver sustainable total returns to unitholders, we are pleased that we will be realising approximately SGD77.1m of capital gains,” he said.
This translates to an attractive net asset-level return of 8.3% per annum over the holding period, he said.
Post-settlement, Tan said proceeds from the divestment would provide the manager with the financial flexibility to continue with several initiatives, including retiring debt and buying back its listed units.