Mapletree Commercial Trust's Mapletree Business City. (Photo: Mapletree Commercial Trust)Mapletree Commercial Trust's Mapletree Business City. (Photo: Mapletree Commercial Trust)

Mapletree Commercial Trust announced on 5 July that it has entered into a put and call option to acquire a number of office and business park properties within Mapletree Business City (Phase 1) for SGD1.78 billion (USD1.32 billion).

The properties will be purchased from Mapletree Business City Pte Ltd, a wholly-owned subsidiary of Mapletree Investments Pte Ltd - sponsor of the Singapore-listed office and retail REIT.

The acquisition involves the purchase of the strata leasehold interest of four blocks of office and business park space. These are namely an office tower (MBC 10) and three business park blocks (MBC 20W, MBC 20E and MBC 30) with a total net lettable area of over 1.7 million square feet.

According to the REIT, the SGD1.78 billion purchase consideration represents a discount of approximately 2.6% to the average of two independent valuations conducted by Knight Frank and DTZ Debenham Tie Leung.

Total acquisition cost is expected to be approximately SGD1.85 billion and the REIT’s manager intends to fund this through a combination of debt and equity.

Mapletree Business City (Phase 1) features a committed occupancy of 99.0% and a weighted average lease to expiry (WALE) of 3.5 years. Approximately 97.5% of existing leases by gross rental income have built in annual step-ups of approximately 3.0% on average, said the REIT.

The acquisition is expected to contribute a net property income (NPI) yield of approximately 5.6% without any income support - higher than the existing portfolio’s NPI yield of approximately 5.1%.

“The addition of the property will increase our net property income and further enhance Mapletree Commercial Trust’s tenant and income diversification”, said Sharon Lim, CEO of the REIT’s manager.

“Upon the successful completion of the acquisition, Mapletree Commercial Trust’s asset size will increase from the current SGD4.3 billion to SGD6.1 billion, reinforcing our position as a leading commercial REIT in Singapore”, she added.

The completion of the acquisition is subject to approvals from the Mapletree Commercial Trust’s unitholders at an extraordinary general meeting to be held on 25 July 2016 and a successful equity fundraising. Details of the fundraising will be released at a later time, said the REIT.

Units of Mapletree Commercial Trust slipped by more than 3.3% from its previous close on the Singapore Exchange to finish at SGD1.46.

By Ridzwan Rahmat

Ridzwan has been analysing REITs and business trusts since 2008, and personally manages a portfolio comprising mainly of SGX-listed REITs. He founded REITsWeek in 2013.