OCBC notes Suntec REIT’s (T82U.SG) acquisition of one-third stake in MBFC Phase 1, subject to unitholder approval, to be funded by $1.105 billion debt (72%), $428.2 million equity (28%).

Debt facility secured at very competitive all-in cost of debt of 3.12%; timing, issue price of private placement equity portion dependent on market conditions. Says acquisition translates to “fairly tight” initial yield of 4%, “nevertheless, we believe this is a sound acquisition for Suntec from a long-term, strategic perspective.”

Revises issue price assumption down to $1.30 per unit from $1.50, but fair value estimate slips only marginally to $1.63 from $1.64 due to lower-than-expected cost of debt.

“Suntec is one of the best proxies...to the office market/revitalisation of the Marina Bay area today in terms of both exposure and valuations.” With an estimated total return of 19.1%. Keeps at Buy. REIT off 0.7% at $1.44.