- Divesting Equity Plaza, a 22-year-old office building at Raffles Place for an attractive sum of SGD550m or SGD2,181 psf.
- A positive move as the building is a non-core asset. The sale would lift our RNAV estimates by 9 SGD cts to SGD6.22.
- Reiterate BUY. Forecasts and TP of SGD4.60 stay unchanged.
Equity Plaza sits on a 99-year leasehold site, with a remaining tenure of 74 years. Floor plates are 10,000 sq ft per floor, which is not a Grade A specification.
The buyer is a consortium comprising Sam Goi's listed entity GSH Corp, TYJ Group (private vehicle of Sam Goi) and Vibrant Group (formerly known as Freight Links). The consortium said the purchase is both for rental returns and capital gains from an expected subsequent sale of the property on a strata-titled basis. The price works out to SGD2,181 psf, which is 62.8% higher than our previous estimate of SGD1,340 psf. It is an attractive selling price for the vendors. Based on an estimated monthly passing rent of SGD7.50 psf, this translates to an NPI yield of barely ~3%. The sale would raise our RNAV estimates for Keppel Land by SGD0.09 per share to SGD6.22.
Sale of MBFC Tower 3 next in line
We are positive on the sale as Equity Plaza is a non-core asset and allows Keppel Land to book a net gain of SGD59.5m and receive net proceeds of SGD195.3m. On the heels of Keppel REIT’s (KREIT) recent sale on Prudential Tower for SGD512m, we believe that it is highly likely that Keppel Land will next divest its one-third stake in MBFC Tower 3 (valued at SGD1.1b) to KREIT in 2H14. Reiterate BUY. We keep our forecasts and TP of SGD4.60 unchanged, for now.
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