Tuesday, June 26, 2012
K-REIT: Entered into a conditional purchase for a 12.4% interest in Ocean Properties which holds Ocean Financial Centre (OFC) for $228.4m after netting off liabilities from Avan Invts. This increases K-REIT's stake of OFC to 99.9%. The valuation of the 12.4% stake is approx $291.0m. K-REIT will fund the acquisition through borrowings and issuing 60m units at $1.17 to Ong Hldgs, and aggregate lvg is expected to be 43.9%. The issue price is approx a 15% premium to last done at $1.02. Ong Hldgs is a shareholder of Avan Invts. One reason for accepting the shares at a premium could be the tax advantage enjoyed as a holder of K-REIT rather than holding the asset itself. The acquisition is expected to be yield accretive with pro-forma DPU for 31 Dec 2011 increasing from 4.46c to 4.68c. The vendor will also provide rental support to K-REIT for up to $24.1m till 2017. OFC is a 43 storey Grade A office development located on a 999 yr site nxt to Raffles Place MRT. 93% of K-REIT Sg assets will be located in prime CBD. Deutsche maintains Hold on the acquisition. The acquisition could be viewed positively in light of the accretion as well as possible tax advantages. K-REIT currently trades at yield of 5.73% based on trailing 12 mths.