The Goldman Sachs Group, Inc. (GS) announced its intention to buy a 6.7% stake in Keppel REIT from a subsidiary of Keppel Corporation (KPELY) for S$279.9 million ($223 million). Keppel is the world’s largest oil-rig maker. On completing this transaction, Keppel Corp.’s stake in the REIT will be reduced to 51.5%. The deal is expected to close by May 27.
Goldman Sachs will acquire 180 million shares of the real estate investment trust for S$1.555 per unit ($1.238). The price reflects a discount of 3.5% to Keppel REIT’s (KREIT) closing price on May 20, 2013.
Keppel REIT qualifies as the largest proprietor of office assets in Singapore and Goldman is depending on the expected rise in office building rents in 2014. Moreover, for locations in prime areas, rents are expected to increase 13% per annum in 2 years time.
Goldman is not new to the REIT sector. Earlier in July 2012, the banking major had plans to venture into Japan’s property market through its asset management wing. The U.S. investment bank aimed to expand private real estate investment trust (REIT) in the Japanese soil to 300 billion yen ($3.7 billion) till 2017.
The company’s decision to purchase stake in Keppel REIT is engendered by the expected boom which it foresees in the Singaporean real estate market. It believes that investing in Singapore properties will yield higher returns over the long term, once the economy stabilizes and the government’s policies come into effect extensively.
Currently, Goldman carries a Zacks Rank #3 (Hold). Better performing banks include Meta Financial Group, Inc. (CASH) and Provident Financial Holdings, Inc. (PROV), both carrying a Zacks Rank #1 (Strong Buy).
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