CAPITACOMMERCIAL Trust (CCT) is buying 20 Anson Road for S$446.6 million, inclusive of a yield stabilisation amount of S$17.1 million, to be drawn over the next 3.5 years. Excluding the stabilisation amount, the deal works out to be S$2,121 per square foot (psf) or net property income (NPI) yield of 4 per cent based on net property price of S$430 million.
The building has a net lettable area (NLA) of 202,500 sf and is currently 100 per cent occupied.
The price is in line with recent transacted prices of S$2,043- S$3,050 psf. As most of the leases were sealed during the market trough in 2009/2010, average monthly passing rent for 20 Anson Road is S$6.18 psf, which is fairly low compared to the current market rents in the vicinity at S$8.44 psf. We also expect rental market to weaken on the back of a slower economy.
The trust will fund the purchase with about S$100 million debt and about S$353 million cash. This will increase net gearing from 30.2 per cent to 31 per cent. Including Market Street redevelopment and 6 Battery ongoing AEI works, net gearing will be closer to 33.5 per cent.
Maintain 'buy' at a lower TP of S$1.30. We raise our FY2012/2013 distribution per unit (DPU) by 4-7 per cent to account for the additional income. However, discounted cash flow-backed TP is reduced by 4.4 per cent to S$1.30 due to the higher cost of capital versus property yield.
BUY
BUY
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