KEPPEL Reit' s manager on Thursday proposed 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 per new unit to raise at least S$270 million in gross proceeds.

 

The manager said in a bourse filing that it will use about S$262.5 million or 97.2 per cent of the gross proceeds to partially fund the real estate investment trust' s (Reit) S$651.5 million acquisition of Keppel Bay Tower from sponsor Keppel Land, the property arm of Keppel Corporation.

 

The issue price range of between S$1.112 and S$1.146 per new unit represents an estimated discount of between 2.7 per cent and 5.6 per cent to the volume-weighted average price (VWAP) of S$1.1783 per unit in the Reit for trades done the preceding market day on Wednesday and up to the time the placement agreement was signed on Thursday.

 

Based on an adjusted VWAP of S$1.1689 per unit, the issue price range represents an approximate discount of between 2 per cent and 4.9 per cent.

 

The adjusted VWAP subtracts an estimated advanced distribution of about 0.94 Singapore cent. The manager proposed the advanced distribution to ensure the distributable income accrued by Keppel Reit up to the day before the issue of the new units is only distributed in respect of existing units. The manager expects to issue the new units on or around March 1.

 

After the advanced distribution, the next distribution will comprise Keppel Reit' s distributable income starting from the day the new units are issued to June 30, 2021. Half-yearly distributions will then resume.

 

The manager said a further announcement on the actual quantum of the advanced distribution will be made in due course.

 

DBS, Citigroup Global Markets Singapore and BNP Paribas' Singapore branch are the joint lead managers and underwriters for the placement. The private placement will be made to eligible institutional, accredited and other investors, the manager said.

 

It believes the private placement, in combination with debt financing, is an efficient and overall beneficial method of funding the Keppel Bay Tower acquisition.

 

" Apart from allowing for the participation of more potential institutional and accredited investors, the private placement increases the total number of units in issue and the unitholder base, which is expected to enhance the trading liquidity of the units," the manager noted.

 

The expected increase in Keppel Reit' s trading liquidity would potentially enhance the Reit' s weightage in indices and represent a step towards further index inclusions, which may lead to stronger investor demand for the units, the manager added.

 

It will use around S$4 million to pay professional and other fees and expenses incurred in connection with the proposed acquisition, private placement and loan facilities. The remaining S$3.5 million will be used to repay existing indebtedness and for general corporate and working capital purposes.

 

Keppel Bay Tower is a Grade A office building located near HarbourFront MRT station. It has a total net lettable area of about 386,600 square feet, and comprises an 18-storey tower block as well as a six-storey podium block. As at end-September 2020, committed occupancy stood at 99.2 per cent.

 

The proposed deal is expected to provide accretion in Keppel Reit' s distribution per unit (DPU) of 2.7 per cent for the financial year ended Dec 31, 2019, and 2.9 per cent for the six-month period ended June 30, 2020, on a pro forma historical basis. 

 

The initial net property income yield is estimated to be 4 per cent, taking into account rental support. 

 

Post-acquisition, Keppel Reit' s assets under management will grow to about S$9 billion. The proposed acquisition also reduces the Reit' s exposure to any single asset and further diversifies its income streams.

 

As the proposed acquisition is an interested-party transaction, it will be subject to the approval of Keppel Reit unitholders at an extraordinary general meeting to be held on Feb 24.

 

KEPPEL real estate investment trust (Reit) reported a distribution per unit (DPU) of 2.93 Singapore cents for the second half of the fiscal year ended December, up 4.6 per cent from its DPU of 2.80 cents in the year-ago period.

 

This brought the Reit' s full-year DPU for the whole of FY 2020 to 5.73 Singapore cents, a 2.7 per cent increase from 5.58 Singapore cents in FY 2019.

 

Keppel Reit unitholders will receive their distributions for the second half of the year on March 1.

 

Distributable income for the second half of the year rose 5.5 per cent to S$99.8 million from S$94.6 million in the year-ago period. This lifted the Reit' s distributable income for FY 2020 to S$194.6 million, some 2.8 per cent higher than S$189.3 million for FY 2019.

 

Keppel Reit said the improvement was due primarily to contributions from T Tower and Victoria Police Centre, as well as lower borrowing costs.

 

However, this was partially offset by the absence of income from Bugis Junction Towers which was divested in November last year, as well as the impact of Covid-19 tenant relief measures and the cessation of rental support.

 

For the second half of 2020, Keppel Reit' s net property income attributable to unitholders rose 17.3 per cent to S$68 million.

 

Portfolio-wise, the Reit has a committed occupancy of 97.9 per cent and a weighted average lease expiry (WALE) of 6.7 years as at the end of 2020.

 

For FY 2020, Keppel Reit said it had a tenant retention rate of 72 per cent due mainly to non-renewals at One Raffles Quay and Marina Bay Financial Centre.

 

The Reit added that more than half of the non-renewed spaces have since been committed to new and expanding tenants.

 

The Reit' s " active portfolio optimisation efforts" in 2020 include the practical completion of the Victoria Police Centre in Melbourne, and the acquisitions of Pinnacle Office Park in Sydney and Keppel Bay Tower in Singapore.

 

As at end 2020, Keppel Reit has some S$835 million of undrawn credit facilities available, including S$367 million worth of committed facilities.

 

Looking ahead, the manager of Keppel Reit said the high portfolio committed occupancy, long WALE and established tenants from diversified sectors will continue to support its income resilience.

 

Said the Reit: " While telecommuting has become widely adopted during the Covid-19 pandemic, the manager believes that physical offices will remain a necessity, although the form and functions of the office will evolve."

 

" The manager will continue to optimise Keppel Reit' s portfolio and calibrate its leasing and investment strategy to meet potential shifts in occupier demand."

 

The manager of Keppel REIT says that the trustee of the REIT, RBC Investor Services Trust Singapore, has issued $150 million 3.15% sub subordinated perpetual securities pursuant under the Series 004 Tranche 002 Securities programme.

The Series 004 Tranche 002 securities will be consolidated and form a single series with the existing $150 million 3.15% subordinated perpetual securities issued on Sept 11.

 

The securities have received approval-in-principle from the Singapore Exchange Securities Trading Limited (SGX-ST) for its listing and quotation.

They are expected to be admitted to the official list of the SGX-ST at 9am, on Oct 8.

 

OCBC is the sole lead manager and bookrunner of the offering of the Series 004 Tranche 002 Securities.