Suntec REIT - Extracting value from Park Mall.
- Suntec REIT announced that it has entered into an agreement to divest Park Mall for $411.8m.
- Based on its current NLA of 267k sqft and FY14 NPI of S$18.9m, this translates into a sale value of S$1,541 psf and NPI yield of 4.6%.
- Suntec REIT will subsequently take a 30% stake in a JV Co together with Singhaiyi Group Ltd (35%) and Haiyi Holdings Pte Ltd (35%), which is controlled by Mr. Gordon Tang. The JV Co will completely redevelop the property into a commercial development comprising two office towers with an ancillary retail podium, and will apply to extend the lease term to 99 years from 53 years currently.
- Suntec REIT will contribute S$115m of equity to the JV Co based on its pro rata stake.
- Upon completion, Suntec REIT will have the right to acquire one office tower, while Singhaiyi and Haiyi will collectively have the right to acquire the other office tower and the retail podium.
- Assuming construction cost of S$500 psf, we estimate total development cost including lease extension top up (to 99 years) to be in the range of S$700m (c.S$1,600 psf).
- We cut our FY16 DPU estimates by c.6%.
- Maintain HOLD, TP reduced to S$1.76 (Prev S$1.84).
(Yeo Kee Yan, Ling Lee Keng)
Source: http://www.dbsvickers.com/
