Almost two months ago Keppel Land (of which I am a shareholder) and K Reit (not shareholder) announced
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K-REIT Asia has entered into a conditional share purchase agreement with Bayfront Development Pte. Ltd., a wholly-owned subsidiary of Keppel Land Limited (Keppel Land), for the acquisition of a one-third interest in Phase One of Marina Bay Financial Centre (MBFC Phase One) at an agreed value of approximately S$1,426.8 million (inclusive of rental support).
At the same time, as part of the asset swap, K-REIT Asia has signed a conditional sale and purchase agreement with Mansfield Developments Pte Ltd, a wholly-owned subsidiary of Keppel Land, for the divestment of Keppel Towers and GE Tower (KTGE) at an agreed value of S$573.0 million, which is above the valuation of S$540.7 million as at 31 December 2009.
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This morning kepland shareholders approved the asset swap, and in the afternoon K reit shareholders also approved; I wanted to attend the kepland meeting but arrived late - the meeting ended after 20 minutes; in fact the deal looks good for kepland, but is not so clearly beneficial from the other side. Aside from pricing, K reit is allowing kepland to reap the benefits of the older properties' development potential - as a real estate investment trust, it need to generate good cash flow to pay out to unit holders; in contrast, kepland is more in the property development business, with land and older properties that have potential but produce little or no immediate income; on the other hand, a reit is more able to carry a high level of debt as mortgagees hold the security of income producing properties.
I actually briefly conversed with a shareholder of both units at the lunch after the kepland meeting, who had grave reservations about the asset shuffle; however, since he did not publicize his views, e.g., using a website, before the meeting, I thought it unlikely that he would meet many like minded shareholders at lunch. Though K reit was spun off from kepland a few years ago so at the time every kepland shareholder was also a k reit shareholder, most people buy and sell frequently enough to cut down the overlap with time lapse; the no. of people who hold both shared, turn up for both meetings, and look for others in the same situation to talk to during the lunch, must have been few.
