Bookmark & Share
Frasers Commercial Trust (FCOT) has agreed to sell a 16-storey mixed-use building at 55 Market Street in Raffles Place to an unrelated third party for SGD216.8 million, according to an SGX filing on Tuesday (10 July).
The selling price represents a 44.5 percent premium over the property’s valuation of SGD150M as of 1 July 2018 and greatly exceeds its original purchase price of SGD72.5M in 2006.
“55 Market Street is the smallest of our assets and is non-core. Monetizing it at a gain of close to SGD67M above valuation and almost tripling the initial purchase price unlocks significant value. It also creates opportunities for us to recycle capital to higher-yielding investments and pursue other growth initiatives as we continue to reshape and strengthen the portfolio for long-term growth,” said Jack Lam, CEO of FCOT’s manager, Frasers Commercial Asset Management.
With a leasehold term of 999 years starting from 1826, the property comprises 15 levels of office space, along with two floors of retail space on the ground and basement levels. With a net lettable area of 71,796 sq ft., 87.9 percent of its premises are occupied as of 31 March 2018.
At the same time, it accounted for 6.3 percent of the trust’s property portfolio by value and contributed approximately 3.5 percent of the trust’s net property income (NPI) for Q1 2018. Moreover, the selling price works out to an annualised NPI yield of 1.7 percent
“The sale consideration is equivalent to SGD3,020 psf based on the building’s NLA and translates to an exit yield of 1.7 percent, which is likely to be a record low yield for a Singapore office building,” said analysts Mervin Song and Derek Tank from DBS Vickers Securities.
Despite the low exit yield, FCOT is now in a strong position to divert more capital into higher yielding UK business park after its maiden purchase of a 50 percent stake in Farnborough Business Park in late-2017, they noted.
“With FCOT demonstrating that it does not fall in love with its assets and is willing to sell its properties at the right price, combined with leverage to the expected multi-year upturn in the Singapore office market, we maintain our buy call with a target price of SGD1.65.”
The divestment of 55 Market Street is expected to be completed by 31 August 2018.
Senior Content Producer, Christopher Chitty, edited this story
Related Articles:
Raffles City Chongqing to open next year
Hong Kong Street shophouse up for sale at $18m
Punggol Digital District to see Singapore’s first Open Digital Platform