One Raffles Quay Floated as Possible Divestment for Suntec Reit

At an earnings briefing on 24 July, Suntec Reit’s CEO Chong Kee Hiong said One Raffles Quay could be a candidate for divestment. Asked whether the prime Grade A office asset in the Central Business District or Marina Bay Financial Centre would be the more likely sale candidate, Chong replied: “Yes, purely based on yield.”

He explained that One Raffles Quay is held in a private limited entity rather than a limited liability partnership, meaning the trust has to pay income tax on its earnings from the property. Suntec Reit holds a one-third stake in both One Raffles Quay and MBFC. The remaining one-third stakes in One Raffles Quay are held by Hongkong Land and Keppel Reit.

Analysts have floated the idea that Suntec Reit could sell its one-third stake to Hongkong Land’s private fund at a premium, after the property giant acquired a 10.8% stake in the trust. Hongkong Land has injected its interests in both properties into its S$8.2 billion Singapore Central Private Real Estate Fund.

Suntec Reit’s new sponsor, Tang Organization, controlled by Gordon Tang and his wife Celine, announced in March that it is undertaking a review to “strengthen portfolio performance and enhance capital efficiency.” The review will also explore “disciplined approaches to asset optimisation and recycling,” with the initiatives expected to “support higher distributions” while balancing capital management needs and long-term sustainability. The strategic review is expected to be completed by the end of the year.

Chong stressed that the trust has not begun discussions on divesting its Singapore assets. Instead, it remains focused on selling its mature assets in Australia and strata units in Suntec City Office Towers, having sold about S$30 million in strata offices so far this year. Proceeds from the planned divestments, and potentially from the sale of One Raffles Quay, could fund accretive acquisitions while the strategic review is ongoing.

Some analysts have reckoned that proceeds from a potential One Raffles Quay sale could be used to acquire 9 Penang Road, a Grade A commercial building tenanted by UBS and owned by Suntec Reit’s sponsor. On a potential injection of 9 Penang Road, Chong said the Reit was in no hurry, as the Grade A office building is a sponsor asset. However, his preference would be to acquire the property in full rather than a partial stake, as that would give the Reit greater control while reducing issues related to interested-party transactions.