CAPITACOMMERCIAL Trust (CCT) expects financing to become more expensive after it raised US$1.2 billion to fund an acquisition of an office tower this year.
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The manager of about three million square feet of commercial space in Singapore agreed in March to buy a 23-storey office block known as 1 George Street in Singapore's business district for $1.17 billion. The trust said it will fund the acquisition with debt such as convertible bonds and medium-term notes. 'We raised the debt at the right time before the increase in rates, but going forward, we see that as a greater challenge,' chief executive officer Lynette Leong said at a real estate conference in Singapore this week.
CapitaCommercial Trust's shares have fallen 21 per cent this year on concern that borrowing costs for the trust may rise, prompting Citigroup to downgrade the stock earlier this month.
Asia's real estate funding costs are likely to remain high over the next 12 months after rising as much as 700 basis points in the past year, Sameer Nayar, head of real estate finance at Credit Suisse Group, said this week.
CapitaCommercial said in April it plans to sell $280 million of bonds, with an option to raise another $90 million. It also issued $150 million of medium term notes and took on loans for the acquisition. -- Bloomberg
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