Exposed! 3 Things Investors Should Know About Keppel REIT

Over the past weekend, I managed to meet up with a friend of mine who’s an excellent investor.

During our chat, he shared that he had recently attended Keppel REIT’s (SGX: K71U) latest annual general meeting for its fiscal year ended 31 December 2015. The real estate investment trust owns commercial properties in both Singapore and Australia and counts property development and marine engineering conglomerate Keppel Corporation Limited (SGX: BN4) as its manager and major unit holder.

My friend recounted some of the things he had learnt about Keppel REIT during the annual general meeting and I was fascinated. After I got home, I eagerly dug into Keppel REIT’s financial track record and found some things investors should note. Here they are:

1. The REIT’s managers have seen their pay jump by a wide margin over the past four years.

In 2012, the Keppel REIT had expensed S$39.4 million for its manager’s management fees. In 2015, that fee had jumped by 27% to S$50.0 million.

2. Growth in the manager’s fees seem commensurate with the growth in the REIT’s distributable income.

Keppel REIT’s income available for distribution in 2015 was S$217.3 million, some 7.6% higher than the S$201.9 million seen in 2012.

3. But, unitholders don’t seem to have enjoyed much of that growth.

Interestingly, Keppel REIT’s distributions on a per unit basis had declined by 4.3% annually (or 12.5% in total) from 7.77 cents per unit in 2012 to 6.80 cents per unit in 2015.

This gulf in the growth of Keppel REIT’s distributions on an aggregate level and a per-unit level come largely from the various private placements that Keppel REIT had done in the past few years.

In 2013, the REIT had issued 135 million units in total for a few private placements; in 2014, the REIT had issued 347 million new units of itself (including 152 million in units issued for the purchase of Marina Bay Financial Centre Tower 3). For perspective, Keppel REIT had ended 2012 with 2.631 billion units, so the private placements (482 million units in total, or 18% of the end-2012 unit count) were a significant addition to the REIT’s total units outstanding.

So, to tie it all up, Keppel REIT is an investment trust that has seen its managers getting more pay over the past three years from 2012 to 2015 even though its unit-holders have seen their distributions getting slimmer.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Chong Ser Jing doesn't own shares in any companies mentioned.