Keppel REIT to acquire 50% interest in Sydney office building for S$321M

SINGAPORE: The Keppel REIT manager has signed a contract to acquire a 50% interest in the 255 George Street property in Sydney’s central business district (CBD).

The Edge Singapore reports the agreement, made on March 28, involves A$363.8 million (S$321 million) and was signed with The Trust Company (Australia) Limited and Mirvac Funds Management Australia Limited.

Under this arrangement, Mirvac Funds Management Australia Limited will retain the remaining 50% ownership of the property.

The property is a 29-storey Grade A office building in Sydney’s CBD.  It covers a total area of 38,996.8 square metres, with most of it being office space, a bit of retail space, and room for 188 cars.

In terms of accessibility, the property enjoys a prime location along George Street, a major thoroughfare in Sydney’s CBD, ensuring high visibility and ease of access via various transportation modes.

As of December 31, 2023, the property boasted a solid weighted average lease expiry (WALE) of 6.8 years and an occupancy rate of 93.0%. Notable tenants include prestigious entities such as the Australian Taxation Office and Bank of Queensland.

Keppel REIT is shelling out A$18,658 (approx. S$16,425)  per square metre for this acquisition, which promises a first-year yield surpassing 6.0%.

Furthermore, it’s anticipated to boost Keppel REIT’s distribution per unit (DPU) by 1.4%, based on pro forma data from December 31, 2023. Both buyer and seller agreed upon the price, considering the property’s independent valuation.

The acquisition is estimated to cost Keppel REIT a total of A$390.1 million (approx. S$343.41 million), inclusive of associated fees.

This move signifies more than just property acquisition for Keppel; it solidifies Keppel REIT’s partnership with Mirvac. This means that Keppel REIT’s Australian properties will make up 19.3% of its assets.

Koh Wee Lih, CEO of Keppel REIT’s management, said, “Located in the highly sought after core precinct of Sydney’s CBD, 255 George Street is an iconic freehold Grade A office building with excellent environmental, social and governance (ESG) credentials.”

He added, “With the core precinct’s positive office market outlook and the property’s prime specifications, this DPU-accretive acquisition will enhance the quality of Keppel REIT’s portfolio and we are confident that it will continue to attract companies looking for quality office spaces in Sydney.”

Looking ahead, he noted, “We will continue to seek opportunities within Keppel REIT’s portfolio for optimisation and capital recycling, while remaining disciplined in capital management, to capture opportunities with attractive total returns over the long term.”

As of 9:05am, Keppel REIT units maintain a steady trading price of 87 cents each. /TISG