CAPITALAND COMMERCIAL TRUST
CCT
C61U.SI
CapitaLand Commercial Trust: To acquire remaining 60% of CapitaGreen
- CapitaGreen valued at S$2.28k psf
- To be wholly financed by debt
- Expected to be DPU accretive
Proposes to exercise call option to acquire remaining 60% of CapitaGreen
- CCT has proposed that it would exercise its call option to acquire the remaining 60% of MSO Trust – a special purpose sub-trust which holds CapitaGreen, a grade A office tower with a 57- year leasehold tenure – for a total acquisition outlay of ~S$393m. The remaining stakes of MSO Trust are held by CapitaLand Group (50%) and Mitsubishi Estate Asia Pte Ltd (10%), and the transaction translates to an asset valuation of S$1,600.5m, or S$2,276 psf, which was derived from the average of two independent valuations conducted by Knight Frank and CBRE.
- We understand that CCT plans to fund the acquisition wholly through S$393m of debt and in addition, will also assume S$534m of debt from CapitaGreen’s existing borrowings.
Transaction to be wholly financed by debt and expected to be DPU accretive
- As at end Mar 2016, CapitaGreen’s committed occupancy was 92.8%, with no leases expiring over the period of heavy supply before 2018.
- Given that this acquisition is to be wholly financed by debt, it is expected to be accretive; on a pro-forma basis, CCT’s 1Q16 DPU would have increased by 1.4% to 2.22 S-cents from the reported 2.19 S-cents with the proposed acquisition.
- The pro-forma aggregate leverage of the trust will also increase from 30.1% (as at end Mar 2016) to 37.7%, which is still below the long term ceiling of 40% set by management and significantly below the 45% regulatory limit.
- All things considered, we see this acquisition to be a net positive, given that the trust will is acquiring full control of an asset it understands well at a reasonable valuation and this will be DPU accretive.
- This acquisition will be subject to the approval of CCT’s shareholders at an EGM later this year; pending its approval, our fair value estimate of S$1.39 remains unchanged.
- Maintain HOLD.
Eli Lee
OCBC Securities
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http://www.ocbcresearch.com/
2016-05-25
OCBC Securities
Analyst Report
1.39
Same
1.39
