Singapore-listed Suntec REIT has agreed to acquire a 100% interest in a Grade A office building with ancillary retail, The Minster Building, located in the heart of City of London for £353 million (S$667.2 million) and to divest a portfolio of strata units at Suntec City Office for S$197 million.
“We are pleased to expand our footprint in London with the acquisition of The Minster Building. The Grade A office development is a strategic fit with Suntec REIT’s existing portfolio and will enhance the resilience, diversification and income stability of Suntec REIT’s portfolio. The property has an income yield of 4.5%4 and long weighted average lease expiry of 12.3 years,” said Chong Kee Hiong, Chief Executive Officer of the Manager.
”The divestment of 78,491 sq ft of Suntec City Office strata units at an agreed property value of S$197 million or S$2,510 per square foot represents a 8.9% premium over the independent valuation of S$180.9 million and a net gain on divestment of S$13.9 million. The net property income yield was 3.1%,” said the company in a press release.
“The divestment of Suntec City Office strata units, coming on the back of the recent sale of 9 Penang Road and together with the acquisition of The Minster Building is the result of our active portfolio management to enhance unitholders’ value. The proceeds from divestments and the recent perpetual securities issuance have improved our financial flexibility and enabled us to pursue growth opportunities for high quality and accretive assets in good locations. The Minster Building is higher yielding than the divested assets and we achieved DPU and NAV accretions of 3.6%5 and 0.7%6 respectively for the unitholders,” commented Chong Kee Hiong.
Suntec REIT said the building is well-located in the heart of City of London and is within 10 minutes walking distance to five train stations.
Built in 1990, The Minster Building is the largest of 3 buildings within the Minster Court Estate. Significant renovations and refurbishments were completed in 2018.
The Minster Building has a committed occupancy of 96.7%. The office component is 96.2% leased and is occupied by quality office tenants from diversified sectors with a weighted average lease expiry of 11.3 years. The strong income stream from the office tenants constitute 93.4% of The Minster Building’s total rental income.
Ancillary retail in The Minster Building which is fully leased, comprises a restaurant / bar, a cafe and an upmarket gymnasium which includes a swimming pool.
Suntec REIT said, to protect the property’s income and ride out the current pandemic, there is a 2-year income guarantee for vacant spaces and retail leases and an approximately 1-year income guarantee for the co-working lease.