October 26, 2021

Keppel Reit distributable income up 20.8% for first 9 months

By ellen

SINGAPORE (THE BUSINESS TIMES) – Keppel Reit said its distributable income from operations for the first nine months of 2021 rose 20.8 per cent year-on-year at $159.9 million.

The manager said the rise was mainly due to contributions from the Victoria Police Centre in Melbourne, Pinnacle Office Park in Sydney and Keppel Bay Tower in Singapore.

The increase was partially offset by the impact of the divestment of 275 George Street in Brisbane. Proceeds from the sale were used to repay debt and lower the real estate investment trust’s (Reit) aggregate leverage to 37.6 per cent as at Sept 30, 2021.

Distributable income from operations for the first nine months of 2021 excludes any distribution of capital gains, which will be disclosed at the announcement of full-year results for 2021, the manager said in the third-quarter business update on Tuesday (Oct 26).

Net property income attributable to unitholders was up 42.6 per cent to $116.8 million from a year ago.

The weighted average term to maturity of Keppel Reit’s borrowings has also been lengthened during the quarter to 3.3 years, with the issuance of $150 million of seven-year medium term notes at 2.07 per cent per annum in Sept 2021.

For the first nine months of 2021, the Reit’s all-in interest rate was reduced to 1.99 per cent per annum compared to 2.39 per cent per annum a year ago, with interest coverage ratio at 3.9 times. Some 71 per cent of Keppel Reit’s total borrowings are at fixed rates.

The Reit’s portfolio committed occupancy was 97.1 per cent as at Sept 30, while the portfolio’s and top 10 tenants’ weighted average lease expiry remained at approximately 6.1 years and 10.8 years respectively.

For the first nine months of 2021, the Reit had a tenant retention rate of 64 per cent.

The manager highlighted that as at Sept 30, the Reit’s portfolio comprised $8.6 billion of Grade A commercial properties which are “well-located in key business districts”. About 80 per cent of this is in Singapore, 16.4 per cent in Australia and 3.6 per cent in South Korea.

The manager said asset enhancement initiatives are also being carried out at 8 Chifley Square in Sydney to rejuvenate the property, as well as enhance building amenities and tenants’ experience.

On the leasing front, a total of about 1.7 million square feet (attributable area of approximately 738,500 sq ft) was committed in the first nine months of 2021. Most of the leases concluded were in Singapore and the weighted average signing rent for the Singapore office leases was approximately $10.49 per square foot per month (psf pm).

In Singapore, the average core Central Business District (CBD) Grade A office rents reported by CBRE registered an increase in the third quarter of 2021, up from $10.50 to $10.65 psf pm. Average core CBD occupancy remained stable at 92.1 per cent as at the end of Sept 2021.

In Australia, JLL Research noted a quarterly increase in prime grade occupancy in Sydney CBD, Macquarie Park and Perth CBD, while prime grade occupancy decreased in Melbourne CBD during the quarter.

In Seoul, JLL Research reported a slight increase in the CBD Grade A office market occupancy from 87.6 per cent as at end June 2021, to 87.9 per cent as at the end of Sept 2021.

The manager said the Reit’s “quality portfolio” has remained resilient during the Covid-19 pandemic as a result of accelerated vaccinations and further reopenings.

Units of Keppel Reit closed flat at $1.08 on Oct 25.