Keppel REIT DPU falls 3.4% y-o-y to 2.8 cents, portfolio valuation up from 255 George Street acquisition

Jovi Ho
4-min read

Excluding 255 George Street, which was acquired on May 9, the portfolio valuation would have been $9.23 billion, 0.2% lower h-o-h.

Keppel REIT has reported distribution per unit (DPU) of 2.8 cents for 1HFY2024 ended June 30, 3.4% lower y-o-y, despite net property income (NPI) attributable to unitholders growing 8.0% y-o-y to $87.2 million over the same period.

In a July 30 announcement, the manager of Keppel REIT says growth was driven by higher occupancy from Ocean Financial Centre and KR Ginza II, as well as contributions from 2 Blue Street and 255 George Street, a Grade A office property that was acquired on May 9.

Impacted by higher borrowing costs, however, distributable income, including a $10 million anniversary distribution, decreased 1.9% y-o-y during the period to $106.9 million.

Keppel REIT announced in October 2022 that it will distribute a total of $100 million of anniversary distribution over a five-year period. $20 million will be distributed annually with such distribution to be made semi-annually.

Occupancy up

As at June 30, Keppel REIT’s portfolio committed occupancy increased to 97.0% from 96.4% as at March 31.

Approximately 546,300 sq ft, or attributable area of approximately 264,000 sq ft, of office space was committed and Keppel REIT achieved a rental reversion of 9.3% in 1HFY2024.

Portfolio and top 10 tenants’ weighted average lease expiry (WALE) remained at approximately 4.6 years and 8.3 years respectively.

The weighted average signing rent for Singapore office leases was approximately $12.63 per sq ft/per m in 1HFY2024, with average expiring rents for the rest of 2024 at $10.77 per sq ft/per m.

Keppel REIT conducted an independent valuation of its investment properties and following the acquisition of 255 George Street, the portfolio valuation increased by 3.3% h-o-h to $9.6 billion as at June 30.

Excluding 255 George Street, which was newly acquired on May 9, the portfolio valuation would have been $9.23 billion, a decrease of $18.3 million, or 0.2%, when compared to the portfolio valuation as at Dec 31, 2023.

Keppel REIT’s portfolio of prime commercial properties is located in Singapore (77% of portfolio), Australia (19% of portfolio), South Korea (3.1% of portfolio) and Japan (0.9% of portfolio).

Capital management 

With the completion of the acquisition of a 50% interest in 255 George Street, Keppel REIT’s aggregate leverage increased to 41.3% as at June 30 from 39.4% as at March 31.

Borrowings on fixed rates constituted 65% of total borrowings, while weighted average term to maturity of borrowings was extended to 3.0 years as at June 30 as compared to 2.3 years a quarter ago.

All-in interest rate was 3.31% per annum with adjusted interest coverage ratio at 2.8 times.

In June, Keppel REIT established a green financing framework, which will serve as a reference for all its green finance transactions, including bonds, term loans, revolving credit facilities, medium-term notes, convertible bonds, perpetual securities and any other financial instrument publicly or privately placed in various formats, tenure and currency.

Following the establishment of the green financing framework, Keppel REIT issued A$175 million ($154.08 million) of three-year floating rate green notes in June.

As at June 30, sustainability-focused funding rose 82% of the REIT’s total borrowings.

The REIT has some $902 million in loans due in 2025, which makes up 23% of its overall debt portfolio.

Koh Wee Lih, chief executive officer of the Manager, says the addition of 255 George Street helped boost property income, NPI and rental reversion, but Keppel REIT’s Singapore properties are the anchor of the portfolio.

“The committed occupancy of the Singapore portfolio remained high at 98.9%, while NPI increased 4.1% y-o-y. The performance of the Australia portfolio has also improved, with committed occupancy increasing to 93.6% as at June 30, as compared to 91.6% a quarter ago. 1HFY2024 NPI for the Australia portfolio grew 12.3% y-o-y despite a stronger Singapore dollar.”

The REIT’s two properties in North Asia have also achieved full committed occupancy and posted a 13.8% growth in NPI, notes Koh.

“With the high interest rate environment impacting businesses globally, delivering sustainable long-term total return to the unitholders remains our priority,” says Koh. “Moving ahead, we will continue to focus on asset management and exercise discipline in implementing our portfolio optimisation strategy to maintain a sound capital structure over the long term, with a strong and resilient balance sheet.”

Units in Keppel REIT closed 0.5 cents higher, or 0.57% up, at 88 cents on July 29.

Charts: Keppel REIT

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