T Tower, in Seoul. (Photo: Google Maps)T Tower, in Seoul. (Photo: Google Maps)

Keppel REIT is acquiring a 99.38% stake in T Tower from a fund managed by PGIM Real Estate for KRW252.6 billion (USD221 million).

The 28-storey freehold property is a Grade A office building in Seoul’s central business district (CBD), and features approximately 228,000 square feet in net lettable area (NLA).

A remaining 0.62% stake in the property will be acquired by a wholly-owned subsidiary of Keppel Capital.

“While Keppel REIT’s portfolio will remain anchored by our prime CBD assets in Singapore, we believe that owning assets across Singapore, Australia and South Korea will enhance our geographical and income diversification, as well as provide greater stability and further opportunities for growth in the long term”, said Paul Tham, CEO of the REIT’s manager.

T Tower is currently 100% leased, to mainly multinational tenants that include Philips Korea, LG Electronics and SK Communications.

The property has a weighted average lease expiry (WALE) of 2.8 years by NLA as at 31 March 2019, with majority of the leases featuring fixed annual rental escalations of 3%.

It has an initial net property income yield of approximately 4.7%, and the acquisition will be DPU-accretive.

The acquisition is expected to be completed in 2Q 2019 and will be funded with debt, including proceeds from the issuance of the 1.90% convertible bonds announced on 10 April 2019.

Post-acquisition, Keppel REIT’s aggregate leverage will be approximately 38.1% .

The REIT’s assets under management will grow to SGD8.4 billion, with portfolio WALE at approximately 5.5 years.

Keppel REIT finished the trading day 1.6% lower from its previous close on the Singapore Exchange, ending at SGD1.21.

By Shariffa Al-Habshee

Shariffa joined REITsWeek in 2017, and monitors Asia-Pacific REITs for the publication.