Sells stake in PWC Building to DBS Group
- Sells 30% stake in PWC Building
- Estimated transaction value is S$1,892 psf; estimated implied yield of 4.0%
- Ongoing capital recycling strategy; BUY, TP S$4.11
What has happened?
Sells 30% stake in PWC Building to DBS Bank.
- CapitaLand Limited (CAPL) announced they are selling their stake in DBS China Square Limited (DCS) to DBS Group Holdings for a cash consideration of S$150m.
- DCS owns a 28-storey office building at 8, Cross Street, also known as PWC Building. The 355,704 sqft NLA property is located in the Central Business District. The property sits on a piece of leasehold land with an 80-year remaining tenure (till 2095).
- We do not consider that property a Grade A building, but it is well connected and linked to Telok Ayer MRT (through a direct basement link) with a variety of F&B offerings nearby.
- We understand the property has a committed occupancy of 97%, and was valued at S$673m (100% basis) as at 31st Dec14. The property is anchored by PWC LLC, which has naming rights.
Our thoughts
Total transacted value implies S$1,892 psf.
- The transaction is based on the latest adjusted book value of DCS as at 31st May 2015, and is for the equity shares of the entity.
- The consideration of S$150m seems low at first glance (S$1,400psf), but the actual transacted price (after accounting for underlying debt) would be closer to S$1,892 psf, in line with valuation.
4% initial yield.
- Assuming a rental rate of S$9psf, this implies a yield of close to 4%, which is in line with office market valuations and transactions.
BUY, TP S$4.11.
- Strategy is in line with CapitaLand’s ongoing revaluation to recycle capital and deploy into higher yielding assets.
- Maintain BUY, TP S$4.11
(Derek TAN, Rachael TAN, Mervin SONG CFA)
Source: http://www.dbsvickers.com/
