Office REITs - Maybank Kim Eng 2016-06-22: Marina One 29% pre-leased

Office REITs - Maybank Kim Eng 2016-06-22: Marina One 29% pre-leased OFFICE REIT CAPITALAND COMMERCIAL TRUST C61U.SI  KEPPEL REIT K71U.SI  SUNTEC REAL ESTATE INV TRUST T82U.SI 

Office REITs: Marina One 29% pre-leased


Maintain Neutral on Office REITs

  • The developer of Marina One announced that it has topped out the building and secured leases for 550,000 sf of office space. This translates to 29% of total office space at the project. 
  • Leasing momentum at Marina One is slightly ahead of Guoco Tower, which is due to be completed next month. While no official comments were made on the rents secured, market talk suggests that large tenants are expected to pay fairly low rents. 
  • We believe sentiments for office sector could remain weak. 
  • While relatively stable capital values for office assets could lend support to valuation of Office REITs, we remain concerned over falling rents amidst the supply glut. 
  • We have HOLD ratings on its REITs. CCT is our preferred sector exposure.


Marina One offices 29% pre-leased

  • M+S, developer of Marina One, announced that it has topped out the building and secured leases for 550,000 sf of its office space. This translates to 29% of the total 1.88m sf of office space at the project. While no official comments were made on the rents secured, The Business Times reported that large tenants are expected to pay just SGD7 psf at the building
  • Marina One offices are reported to be due for completion in 2017. This is a slight delay from earlier expectations of completion in 2H16.


Pre-leasing momentum ahead of Guoco Tower

  • Leasing momentum at Marina One is slightly ahead of Guoco Tower, an 890,000 sf office building due to be completed next month. 
  • At the time of its topping out, Guoco Tower secured tenants for just 10% of its office space. Committed levels were last reported to be 18% in Apr 2016. 
  • According to Cushman & Wakefield, office space at 570k sf Duo is 33% pre-committed. 
  • CapitaGreen and The South Beach, recently completed office buildings, are 94.6% and 98% committed.


Capital values holding up; Falling rents amidst supply glut remains a sector headwind

  • Despite the soft leasing market, capital values for office assets appear to be holding up. 
  • BlackRock recently sold Asia Square Tower 1, a 99Y leasehold building with 1.25m sf of office space, for a record SGD3.4b to Qatar Investment Authority. Subsequently, Sun Venture sold the Straits Trading Building, a 999Y leasehold building with 159k sf of office space, to MYP Ltd for SGD560m. These deals were estimated to be transacted at narrow net yields of 2.8-3.2%. 
  • While the relatively stable capital values should lend support to valuation of office REITs, we remain cautious over falling rents amidst the supply glut.


Valuations of office REITs 


Valuation of Office REITs - Maybank Kim Eng 2016-06-22



Derrick Heng CFA Maybank Kim Eng | Joshua Tan Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2016-06-22
Maybank Kim Eng SGX Stock Analyst Report HOLD Maintain HOLD 1.40 Same 1.40
HOLD Maintain HOLD 0.97 Same 0.97
HOLD Maintain HOLD 1.56 Same 1.56


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