Keppel Reit: K71U -0.85% has divested its stake in its Brisbane property for A$275 million (S$277.4 million), the real estate investment trust (Reit) said on Thursday.

 

The Reit' s 50 per cent stake in 275 George Street was sold to Charter Hall Prime Office Fund, which currently holds the other 50 per cent interest in the property. The contract of the sale was executed on June 30, 2021.

 

Proceeds of the divestment will be used to repay debt and transaction costs to enhance capital efficiency and manage borrowing costs, and also for further growth opportunities, the Reit' s manager said.

 

The Brisbane property was Keppel Reit' s first Australian asset, which it acquired in 2010 for A$166 million. It had been valued at A$245 million on a 50 per cent interest basis by CBRE Valuations on Dec 31, 2020.

 

The Reit' s manager expects it will recognise an estimated accounting gain of A$9.8 million from the divestment.

 

Chief executive of Keppel Reit Management Paul Tham said: " The divestment of 275 George Street is part of our continuing portfolio optimisation strategy, and will provide us with greater financial flexibility as we seek strategic and higher-yielding acquisitions to enhance the Reit' s income resilience and deliver sustainable total return to unitholders."

 

Post divestment, Keppel Reit' s portfolio will consist of 10 properties across Singapore, Australia and South Korea. Its portfolio committed occupancy will remain at 96.9 per cent.

 

KEPPEL real estate investment trust (Reit) reported a 22 per cent rise in distributable income to S$51.6 million for the first quarter of 2021, up from S$42.3 million in the year-ago period.

 

In a quarterly update on Wednesday, the Reit manager attributed the increase to contributions from Victoria Police Centre in Melbourne and Pinnacle Office Park in Sydney, higher one-off income, as well as lower borrowing costs.

 

However, this was partially offset by the impact of " slightly lower" portfolio occupancy.

 

As of March 31, 2021, Keppel Reit' s portfolio had a committed occupancy of 96.5 per cent and long portfolio weighted average lease expiry of 6.7 years.

 

On the leasing front, a total of approximately 309,800 square feet were committed in the first quarter. Most of the leases concluded were in Singapore. The average signing rent for the Singapore office leases was approximately S$10.64 per square foot per month.

 

Net property income attributable to unitholders for the quarter rose 40.5 per cent year on year to S$36.4 million.

 

Keppel Reit successfully launched a S$270 million private placement on Feb 18, 2021 that was approximately 4.6 times covered, the Reit manager said.

 

Part of the proceeds from the placement will be used to partially fund the acquisition of Keppel Bay Tower in Singapore, which is targeted to complete in Q2 2021. The property, being Singapore' s first zero-energy commercial building fully powered by renewable energy, will augment Keppel Reit' s green footprint, the manager said.

 

As at end-March 2021, green loans represented approximately a quarter of Keppel Reit' s attributable share of total borrowings, including an additional A$50 million green-loan facility obtained in the first quarter.

 

The manager has obtained loan facilities to refinance all outstanding loans that are maturing in 2021.

 

The Reit' s aggregate leverage stood at 35.2 per cent with a weighted average term to maturity of three years. All-in interest rate was reduced year on year to 2.01 per cent per annum, down from 2.58 per cent.

 

Interest coverage ratio was 3.7 times and 85 per cent of the Reit' s total borrowings are at fixed rates.

 

As at end-March 2021, Keppel Reit had approximately S$1.06 billion of undrawn credit facilities available, including S$592 million of committed facilities.

 

The Reit manager said: " As countries around the world make progress in managing the Covid-19 pandemic, the manager remains focused on ensuring stable and sustainable distributions to unitholders, as well as achieving long-term growth.

 

Keppel Reit' s high portfolio committed occupancy, long WALE (weighted average lease expiry) and established tenants from diverse sectors will continue to support the Reit' s income resilience.&rdquo

KEPPEL Reit' s (KReit) private placement has been priced at S$1.13 per new unit, about midway in its indicative range.

 

This comes after its manager' s proposal on Feb 18 of a private placement of between 235.6 million and 242.8 million new units, at an issue price of between S$1.112 and S$1.146.

 

The issue price of S$1.13 represents a 4.1 per cent discount to the real estate investment trust' s (Reit) volume-weighted average price of S$1.1783 for all trades done on Feb 17.

 

A total of 238.9 million new units will be issued to raise gross proceeds of S$270 million, most of which will go towards funding the purchase of Keppel Bay Tower

 

Morgan Stanley analysts Wilson Ng and Derek Chang said in a research note on Friday that the issue price is slightly higher than the assumed issue price of S$1.04 used to calculate the expected distribution accretion.

 

KReit had initially estimated a pro-forma distribution per unit (DPU) accretion of 2.7 per cent arising from the deal.

 

Morgan Stanley now thinks the DPU accretion will be better, at 2.9 per cent. It has an " overweight" rating on KReit, with a target price of S$1.20.

 

The counter closed at S$1.15 on Friday, down S$0.04 or 3.4 per cent.

 

CGS-CIMB analyst Lock Mun Yee told The Business Times that the decline could have been in reaction to the placement price being lower than KReit' s closing price of S$1.19 on Wednesday, before its trading halt on Thursday.

 

KReit said the placement was about 4.6 times covered and saw " strong participation" from new and existing institutional, accredited and other investors.

 

The funds raised will partially cover KReit' s purchase of Keppel Bay Tower from sponsor Keppel Land, the property arm of Keppel Corp. The acquisition, which is an interested party transaction, is subject to unitholders' approval at an extraordinary general meeting scheduled for Feb 24.

 

Around S$4 million of the proceeds will go towards paying professional and other fees and expenses incurred in connection with the proposed acquisition, private placement and loan facilities. And S$3.5 million will be used to repay existing indebtedness and for general corporate and working capital purposes.

 

Trading of the new units is expected to commence on or around March 1 at 9am. This is subject to certain conditions in the placement agreement, including the receipt of in-principle approval from the Singapore Exchange for the listing of the new units on the bourse.