Keppel REIT is purchasing a one-third stake in Marina Bay Financial Centre (MBFC) Tower 3 for $937.5 million, a deal that appears to dilute its distribution per unit (DPU).

The acquisition price is based on an agreed property valuation of $1.453 billion, or $3,268 per square foot, valuing the entire asset at approximately $4.36 billion. The seller, Sageland Private, is a subsidiary of Hongkong Land Holdings.

The agreed valuation reflects a 1.0% discount to the property’s independent appraisal of $1.467 billion. Upon completion, Keppel REIT will hold a two-thirds stake in MBFC Tower 3. The remaining $529.5 million gap between the purchase price and valuation is expected to be covered by debt rollover.

DPU dilution is estimated at 6.4% if the blended debt interest cost is 3.3% annually, or 3.6% if the cost is 2.2%.

To finance the transaction, Keppel REIT has initiated an underwritten non-renounceable preferential offering of new units, aiming to raise $886.3 million. Unitholders will be allotted 23 new units for every 100 existing units at 96 cents each—a 6.8% discount to the undisturbed unit price as of December 10.

This move aligns with Hongkong Land’s strategy to monetize assets, following its September sale of residential developer MCL Land to Malaysia’s Sunway for $738.7 million.

As of September 30, MBFC Tower 3 boasts a 99.5% committed occupancy rate and a weighted average lease expiry of 3.5 years.

Chua Hsien Yang, CEO of Keppel REIT’s manager, stated, "Exercising our pre-emptive right to acquire an additional one-third stake in MBFC Tower 3 offers a rare opportunity to deepen our holdings in a prime Marina Bay landmark, with long-term potential for rental growth and capital appreciation." He added, "This underscores our confidence in Singapore’s prime office sector and our commitment to expanding our Grade A commercial portfolio."

Keppel REIT’s sponsor, Keppel, along with Keppel REIT Investment, Keppel Capital Investment Holdings, and the REIT manager, has pledged to subscribe to their allotted new units.

Keppel REIT units, suspended before market open, closed unchanged at $1.03 on December 11. Hongkong Land shares rose 3.19% to US$6.78.

Sources indicate Hongkong Land may divest all its Singapore office assets. Keppel REIT and Suntec REIT hold rights of first refusal (ROFR) for these properties, which expire tonight.

In Keppel REIT’s annual report, its one-third stakes in MBFC Towers 1 & 2 and Marina Bay Link Mall were valued at $1.794 billion, while One Raffles Quay was appraised at $1.313 million.