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CCT agrees to buy remaining 60% of CapitaGreen for S$393m

SINGAPORE — CapitaLand Commercial Trust (CCT) has agreed to buy the remaining 60 per cent of office tower CapitaGreen near the prime Raffles Place area for about S$393 million.

The CapitaGreen office tower has a net lettable area of around 703,000sqf. TODAY file photo

The CapitaGreen office tower has a net lettable area of around 703,000sqf. TODAY file photo

SINGAPORE — CapitaLand Commercial Trust (CCT) has agreed to buy the remaining 60 per cent of office tower CapitaGreen near the prime Raffles Place area for about S$393 million.

Office property trust CCT currently owns 40 per cent and will buy the remaining stake from MSO Trust — a special purpose sub-trust which holds the office tower. Apart from CCT, MSO’s other owners are CapitaLand Group with 50 per cent and Mitsubishi Estate Asia with 10 per cent.

With a net lettable area of around 703,000sqf, CapitaGreen’s committed occupancy was 92.8 per cent as at end March 2016, said CCT, adding that the property has no leases expiring prior to 2018, which avoids the period of large, new supply in the office market.

Prime office rents continued to weaken in the first quarter, according to a report by property consultancy Knight Frank earlier this month. Rents for such space fell 3.9 per cent quarter-on-quarter as more businesses deployed office space consolidation to reduce costs and demand for new spaces slowed.

Knight Frank said that the expected completions of large-scale developments Guoco Tower and Duo Tower by end-2016 are likely to further intensify competition in the current tenants’ market situation.

Prime office rentals are expected to dip by 8-12 per cent year-on-year by the fourth quarter of 2016, it added.

CCT’s proposed acquisition will be funded through borrowings from committed bank facilities.

Mr Soo Kok Leong, chairman of the manager of CCT, said full ownership of CapitaGreen is projected to generate higher returns for the property trust’s unitholders, as well as augment the quality of its portfolio.

Explaining the potential gain for unitholders, Ms Lynette Leong, CEO of CCT’s manager, said that on a pro forma basis, CCT’s first quarter 2016 distribution per unit (DPU) would have risen by 1.4 per cent to 2.22 Singapore cents from the reported 2.19 Singapore cents with the acquisition.

The proposed full ownership is also expected to increase the value of CCT’s investment properties from S$7.5 billion to about S$8.4 billion and its net lettable area from 3.2 million sqf to 3.6 million sqf.

CapitaLand, which owned half of the CapitaGreen office tower, said it will be realising a gain of approximately S$196 million, comprising S$8.5 million from the divestment as well as cumulative revaluation gain of approximately S$187.5 million recognised between 2013 and 2015.

The gain is based on the latest market valuation determined by the two independent valuers.

As at April 6 last year, CBRE — an independent property valuer appointed by CCT Management, and Knight Frank — an independent property valuer appointed by the trustee of CCT, valued CapitaGreen at S$1,599 million or S$2,274 per sqf (psf) and S$1,602 million (S$2,278 psf), respectively.

These values take into account CapitaGreen’s remaining 57-year leasehold land tenure.

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