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Keppel REIT’s 2018 First Quarter Distribution Per Unit Falls By 2.1%

Keppel REIT (SGX: K71U) is a real estate investment trust (REIT) that has nine commercial real estate properties in Singapore and Australia as part of its portfolio. In Singapore, it has stakes in Ocean Financial Centre, Marina Bay Financial Centre, One Raffles Quay, and Bugis Junction Towers.

Yesterday, the REIT announced its financial results for the first quarter ended 31 March 2018 (1Q2018). Here are 10 key takeaways from the results announcement:

1. Property income for the quarter inched down by 0.3% year-on-year to S$39.7 million. With property expenses going up by 0.6%, net property income slipped 0.6% to S$31.2 million. The lower property income and net property income were due to lower contribution from Brisbane’s 275 George Street, partially offset by higher contributions from Bugis Junction Towers, Ocean Financial Centre and Melbourne’s 8 Exhibition Street.

2. Share of results of associates and joint ventures for 1Q2018 was S$28.5 million, down from S$31.5 million seen a year ago. Together with lower rental support for the quarter, total return attributable to unitholders decreased 11.4% to S$33.8 million.

3. Income available for distribution, however, improved 0.2% to S$48.2 million, due to higher net tax and other adjustments for the latest quarter. Despite that, distribution per unit fell 2.1%, from 1.45 Singapore cents in 1Q2017 to 1.42 Singapore cents in 1Q2018.

4. As at 31 March 2018, the net asset value per unit was S$1.42, an improvement from S$1.41 seen at the end of 2017.

5. For the latest quarter, the aggregate leverage was 38.6%, with the all-in interest rate at 2.75% per annum. In comparison, as at 31 December 2017, the aggregate leverage stood at 38.7%, and the all-in interest rate was 2.62% per annum.

6. The portfolio committed occupancy rate came in at 99.4% in 1Q2018 as compared to 99.7% at the end of 2017. The committed occupancies for the Singapore and Australia assets were well above the market average of 94.1% and 89.6% respectively.

7. The tenant retention rate for the quarter was 93%, and the portfolio weighted average lease expiry came in at 5.3 years. In comparison, for the 2017 fourth quarter, the figures were 95% and 5.5 years respectively.

8. In 1Q2018, the average signing rent for the Singapore office leases was around S$10.05 per square foot per month (psf pm), 2.6% higher than the average signing rent of around S$9.80 psf pm seen for the financial year ended 31 December 2017.

9. In 2018, 15% of leases are due for renewal and review, while in 2019, the figure stands at 11.9%.

10. As for its outlook, Keppel REIT said:

“According to CBRE, office occupancy in Singapore’s core CBD improved quarter-on-quarter (q-o-q) to 94.1% in 1Q 2018, from 93.8% in 4Q 2017. Demand from the insurance and TMT sectors, along with flexible space providers remained strong during the quarter. Average Grade A rents continued its upward trend, increasing q-o-q from $9.40 psf pm in 4Q 2017 to $9.70 psf pm in 1Q 2018 . . .

In Australia, JLL reported stronger leasing activities across Australian office markets. The national CBD office average occupancy improved slightly to 89.6% as at end December 2017, from 89.2% one quarter ago. JLL noted that the vacancy level is at its lowest since 2013, driven largely by employment growth.

Looking ahead, challenges remain amidst a volatile macro environment. The Manager will continue to drive stable portfolio performance through ongoing proactive tenant and lease management so as to deliver sustainable distributable income to Unitholders. A prudent capital management strategy will be maintained to optimise the REIT’s performance in a rising interest rate environment.”

Keppel REIT units ended Wednesday at S$1.20. This translates to a price-to-book ratio of 0.85 and a distribution yield of 4.7%.

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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 contributor Sudhan P doesn’t own shares in any companies mentioned.