Goldman Sachs Group Inc. agreed to buy a 6.7% stake in Keppel REIT from a subsidiary of Keppel Corp., the world’s largest oil-rig maker, for $279.9 Million.

Goldman Sachs will purchase 180 million units of the real estate investment trust for $1.555 per unit, according to a statement to the Singapore stock exchange today. The price represents a 3.5% discount to Keppel REIT’s closing price yesterday.

Goldman Sachs is betting on Singapore’s office market where rents are expected to start rising next year. Prime office rents may climb 13% per annum in the two years to 2016, according to a May 3 report by Standard Chartered Plc. Keppel REIT is the largest landlord of office assets in the island city, the bank said.

Keppel REIT owns the highest-quality office portfolio among office SREITs, Standard Chartered’s analysts Kai Yip and Regina Lim wrote in the note. Prime office buildings such as Ocean Financial Centre, One Raffles Quay and Marina Bay Financial Centre Towers 1 and 2, make up 80% of its portfolio’s 2.37 million square feet (220,180 square meters) of net leasable area, according to the note.

With the sale, Keppel Corp. will cut its stake in the REIT to 51.5%, according to the statement. The sale will be completed by May 27, the company said.

Keppel REIT shares dropped as much as 3.4% toS$1.550, and traded at $1.555 at 9:02 a.m. local time, heading for its biggest drop since July 20. The trust has gained 20% this year compared with the 13% advance in the FTSE Strait Times Real Estate Investment Trust Index.

  ...Last Done: $1.565...

Singapore’s  property trusts, the second-best performers in Asia in the past year, may have to diversify funding sources as they aren’t prepared for an “interest rate shock,” according to Fitch Ratings.

The city’s real estate investment trusts or REITs have been increasing short-term debt with record-low interest rates, according to Johann Kenny, director of corporates at Fitch. They face refinancing risks when borrowing costs rise, and may be pushed to sell assets or shares to boost their funding, he said.

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