Keppel REIT breaks into Seoul market with $301 mil office tower purchase

PC Lee

SINGAPORE (Apr 23): Keppel REIT is acquiring a 99.38% stake in T Tower, a freehold Grade A office building in Seoul’s CBD for KRW 252.6 billion ($301.4 million).

The remaining 0.62% stake will be acquired by subsidiary Keppel Capital Holdings.

The seller is PGIM Real Estate, the real estate investment business of PGIM, the global investment management businesses of Prudential Financial.

Completed in 2010, T Tower is a freehold 28-storey office building offering 228,000 sf in net lettable area (NLA). T Tower is currently 100% leased to established national and international tenants. Some tenants include Philips Korea, LG Electronics and SK Communications.

The property has a weighted average lease expiry of 2.8 years by NLA as at Mar 31. The majority of the leases in the property have fixed annual rental escalations of 3%.

Keppel Investment Management Co, the asset management arm of Keppel Capital in South Korea, will be appointed the local asset manager for the property.

Keppel REIT Management says the acquisition of T Tower is expected to be DPU accretive and offer an initial net property income yield of 4.7%.

Paul Tham, CEO of Keppel REIT Management, says, “The acquisition of T Tower in Seoul is in line with Keppel REIT’s long-term strategic growth plan. 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.”

The deal 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 that was announced on Apr 10.

Post-acquisition, aggregate leverage will be 38.1%. Portfolio WALE will remain at 5.5 years, while the freehold portion of the portfolio will increase from 14.9% to 20.6%.

Keppel REIT closed at $1.23 on Monday.