Distributable income from operations down by 1.4% at S$95.5 million

 

[SINGAPORE] Keppel Real Estate Investment Trust (Reit) on Wednesday (Jul 30) reported a 2.9 per cent decline in its distribution per unit (DPU) for the first half of the 2025 financial year to S$0.0272, from S$0.028 in the corresponding year-ago period.

 

Distributable income from operations fell by 1.4 per cent to S$95.5 million for the period from S$96.9 million in H1 FY2024.

 

The distribution will be paid out on Sep 15, with its record date on Aug 7.

 

Property income rose 9.1 per cent to S$136.5 million from S$125.1 million in the same period a year prior, largely due to contribution from assets in Sydney, Australia, namely 255 George Street acquired in May 2024, and higher occupancy at 2 Blue Street.  

 

Net property income (NPI) increased by 11.8 per cent year on year to $108.3 million for H1, from S$96.8 million in the corresponding period a year before.

 

Based on annualised DPU for H1 and its market closing price of S$0.885 per unit as at Jun 30, the distribution yield stood at 6.1 per cent for the period, down 0.3 percentage points from 6.4 per cent in H1 FY2024. 

 

The portfolio occupancy of Keppel Reit was recorded at 95.9 per cent, and rental reversion was at 12.3 per cent. 

 

Aggregate leverage stood at 41.7 per cent as at Jun 30, with 63 per cent of its total borrowings on fixed rates. The weighted average cost of debt was 3.51 per cent per annum for H1, with an interest coverage ratio of 2.6 times.

 

Cost of debt expected to lower

There are no significant borrowings maturing for the remainder of 2025, according to the manager of the Reit. 

 

The weighted average lease expiry for the portfolio was 4.8 years, as compared with 4.7 years as at Mar 31. 

 

Speaking at Keppel Reit&rsquo s earnings briefing on Wednesday, Sebastian Song, the chief financial officer of the manager, said that he believes the Reit&rsquo s cost of debt has peaked. 

 

&ldquo Coupled with the lower margins of gain during our debt refinancing exercise in 2025 as well as further cuts expected (in) certain benchmark rates, we anticipate a gradual decline in borrowing costs as floating rate borrowings are repriced favourably,&rdquo he added.

 

The reduction in Keppel Reit&rsquo s cost of debt will be more apparent in the second half of this year if the Singapore Overnight Rate Average (Sora), which is the interest-rate benchmark for Singapore dollar loans, continues to come down, said Song. 

 

The bulk of the Reit&rsquo s floating debt, or 75 per cent, is denominated in Singapore dollars while 25 per cent is in Australian dollars and the remaining debt in South Korean won.

 

For H1, Keppel Reit committed approximately 1.2 million square feet (sq ft) (attributable area of about 559,000 sq ft) of leases. 

 

New and expansion demand was primarily driven by the banking, insurance and financial services as well as the technology, media and telecommunications sectors, said the Reit&rsquo s manager. 

 

The trust&rsquo s S$9.4 billion portfolio comprises commercial properties located in the key business districts of   South Korea, Japan, Australia (which makes up 17.5 per cent of its portfolio) and Singapore (78.6 per cent of its whole portfolio). 

 

In particular, the manager of the Reit observed improved performance in the Singapore portfolio due to higher rentals, and emphasised that contributions from 255 George Street and increased occupancy at 2 Blue Street, offset partially by a stronger Singapore dollar, led to a higher NPI. 

 

Chua Hsien Yang, chief executive of the manager, said: &ldquo We made good progress in backfilling vacancies at Ocean Financial Centre in Singapore and 255 George Street in Sydney, Australia, increasing their occupancies to 96.1 per cent and 99 per cent, respectively. In addition, we refinanced the majority of loans maturing in 2025 at lower margins.&rdquo  

 

Asked whether Keppel Reit could raise rents for its Central Business District properties in Singapore, Chua said that he still sees demand from tenants looking to expand, despite elevated rents. These occupiers are seeking more space to foster a &ldquo social setting&rdquo for employees in the city, he noted.

 

He added there were no plans to divest any of the Reit&rsquo s Singapore assets at this time as the market is strong. It is also &ldquo premature&rdquo to sell its two assets in Japan and South Korea, he said. The manager noted that its Japan asset has rental reversions in the high single digit, which is more than the market average. It had also recently signed a lease for its South Korea property, with a 30 per cent higher rent.  

 

On acquisitions, Chua noted that the manager is not actively looking to diversify its portfolio, which is mostly made up of premium office assets. That said, the manager will consider diversifying its assets on a &ldquo case-by-case&rdquo basis if there is strategic value to do so.

 

He added: &ldquo Looking ahead, we remain focused on driving asset performance and maintaining disciplined capital management, while navigating evolving market conditions with agility.&rdquo

Its borrowing costs are up 23.4%

 

[SINGAPORE] Keppel Reit : K71U +1.81% reported on Wednesday (Apr 23) that its distributable income from operations fell 3.5 per cent to S$48.4 million on the year in the first quarter of 2025, from S$50.2 million previously.

 

Including an annual S$20 million anniversary distribution, distributable income fell 3.2 per cent year on year to S$53.4 million, from S$55.2 million.

 

However, as the Reit manager said that it had elected to receive 25 per cent of its management fees in cash from FY2025, it noted that the Reit&rsquo s distributable income (including its anniversary distribution) would have grown 3.2 per cent if management fees were fully payable in units.

 

Borrowing costs jumped 23.4 per cent on the year to S$23.1 million from S$18.7 million, following the acquisition of 255 George Street in Sydney in May 2024, as well as the refinancing of borrowings in FY2024, the Reit manager said.

 

Despite this, net property income (NPI) grew 13.3 per cent year on year to S$54.6 million in Q1 from S$48.2 million.

 

The manager said that these increases were due to better performance of its Singapore and Australia properties.

 

Relating to the Reit&rsquo s interests in One Raffles Quay and Marina Bay Financial Centre, Keppel Reit posted an 11 per cent increase in share of results of associates to S$24.3 million year on year, from S$21.9 million.

 

The Reit&rsquo s aggregate leverage stood at 42.1 per cent, with 65 per cent of total borrowings on fixed rates, and an interest coverage ratio of 2.5 times, the manager said.

 

The Reit&rsquo s sustainability-focused funding accounted for 82 per cent of total debt, the manager noted.

 

In the Reit&rsquo s business update, the manager said that the Reit&rsquo s diversified portfolio of assets &ndash anchored by prime Central Business District assets across different markets &ndash would enhance long-term growth opportunities, while bringing income stability. The Reit&rsquo s portfolio is currently worth S$9.5 billion, with 78.6 per cent of its assets in Singapore.

 

Due to higher rentals, NPI of the Singapore portfolio grew 3.3 per cent year on year, while committed occupancy fell two percentage points from the previous quarter. Its Australian portfolio, which comprises 17.6 per cent of the Reit&rsquo s assets, increased 20.8 per cent year on year due to the acquisition of 255 George Street and higher occupancy at 2 Blue Street &ndash both of which are office buildings in Sydney.

 

The manager said that new leasing demand and expansions in the quarter came largely from the technology, media and telco sector at 47.7 per cent of attributable gross rent, followed by the banking, insurance and financial services sector.

 

&ldquo We remain focused on proactive management of our properties and leases, prudent capital management, and staying agile to adapt to the evolving landscape,&rdquo said Chua Hsien Yang, chief executive of the manager.

DPU fall comes despite a 13.6% increase in H2 FY2024 net property income to S$105.1 million

THE manager of Keppel Real Estate Investment Trust : K71U -1.15% (Reit) reported distribution per unit (DPU) of S$0.028 for the second half ended Dec 31, 2024, falling 3.4 per cent from S$0.029 in the corresponding year-ago period.

 

It will be paid on Mar 17, after the ex date of Feb 5 and record date of Feb 6, said the Reit&rsquo s manager in a bourse filing on Monday (Jan 27).

 

Revenue for the period was S$136.5 million, up 15.5 per cent on-year from S$118.2 million. Net property income rose 13.6 per cent to S$105.1 million, from S$92.5 million year on year.

 

The increase was attributed to higher property income from T Tower, KR Ginza II, 2 Blue Street and 255 George Street. This was partially offset by lower net property income from Ocean Financial Centre and 8 Exhibition Street, due to higher property tax and a lower one-off income for 8 Exhibition Street.

 

Despite the increase in property income, distributable income from operations for H2 FY2024 fell 2.1 per cent to S$97.6 million from S$99.7 million in H2 FY2023. This was due mainly to higher borrowing costs and lower rental support, offset by better net property income and higher share of results of associates.

 

Including the anniversary distribution, distributable income for H2 FY2024 would have fallen 1.9 per cent to S$107.6 million from S$109.7 million in H2 FY2023.

Strength in Singapore offices

In an earnings call after the results, the manager&rsquo s chief executive Chua Hsien Yang noted that Singapore &ndash where the majority of Keppel Reit&rsquo s portfolio is located &ndash is likely to continue boasting healthy rental reversions, as the central business district (CBD) is &ldquo going to be very, very full&rdquo .

 

FY2024 rental reversion for Keppel Reit&rsquo s entire portfolio was 13.2 per cent. Jason Chua, director of asset management, said Singapore achieved rental reversion of 16.5 per cent for the fourth quarter.

 

Chua Hsien Yang, who took up the post on Jan 1, said that while a certain tenant in Ocean Financial Centre is planning to move out, more than half the space has already been backfilled, and rental reversions for this particular area are &ldquo in excess of 30 per cent&rdquo .

 

Media reports previously identified the tenant as French bank BNP Paribas.

 

Although some tenants have been looking to downsize, Chua Hsien Yang said there is still new demand for offices in the CBD, as companies have started to mandate working from the office. New tenants, such as family offices or professional services companies, are also shopping for space.

 

&ldquo A lot of new leases that we are negotiating... are still relatively large. They could be ranging between 40,000 to 50,000 square feet... So it&rsquo s not small by any standard,&rdquo he said.

 

For the full 2024 fiscal year, net property income grew 10.7 per cent to S$201.9 million from S$182.4 million in FY2023, driven by the same factors in H2 FY2024. Revenue was S$261.6 million, gaining 12.2 per cent from S$233.1 million a year ago.

 

Distributable income from operations for FY2024 fell 2.1 per cent to S$194.5 million from S$198.7 million in FY 2023. Including the anniversary distribution, FY2024 distributable income fell 1.9 per cent to S$214.5 million from S$218.7 million.

 

Distribution per unit for FY2024 fell 3.4 per cent to S$0.056 from S$0.058 in FY2023.

 

&lsquo Comfortable&rsquo gearing level

Keppel Reit is not currently looking to divest its assets or acquire new ones, despite its gearing standing at 41.2 per cent.

 

CEO Chua said he is &ldquo comfortable with this level&rdquo , but acknowledged the Reit will most likely be unable to gear up any further at the current stage.

 

&ldquo We need to figure out how we want to manage our gearing, (and) at the same time look to add to the portfolio... but we have not earmarked any assets for active divestment at this point in time,&rdquo he said.

 

As for borrowings, those due in 2025 will mature in the first half of the year. The manager said it is in various stages of refinancing, including discussions with the lenders and documentation of facility agreements.

 

&ldquo Looking ahead, our focus remains on proactive asset management to capitalise on the flight-to-quality trend, and we continue to be disciplined in capital management to deliver sustainable long-term total return to the unitholders,&rdquo he said.

The net proceeds, after deducting issue expenses, will be fully used towards refinancing projects that meet its green financing framework criteria

 

KEPPEL Reit has priced its offering of A$50 million (S$43.8 million) of floating rate green notes due 2027, under its S$1 billion multicurrency debt issuance programme.

 

The Series 008 Notes will bear interest at a floating rate based on the Bank Bill Swap reference rate plus an agreed spread, payable quarterly, said the real estate investment trust (Reit) manager in a bourse filing on Tuesday (Nov 12).

 

Expected to be issued on Nov 19 and mature the same day in 2027, the notes are priced at 100 per cent in denominations of A$250,000.

 

DBS is the sole lead manager and bookrunner for the notes offering.

 

The net proceeds, after deducting issue expenses, will be fully used towards refinancing projects that meet the eligibility criteria set out in Keppel Reit&rsquo s green financing framework.