Keppel Reit lifted by S'pore, Sydney assets

The drop in property income was partly offset by higher earnings from Ocean Financial Centre (above) and Bugis Junction Towers.
The drop in property income was partly offset by higher earnings from Ocean Financial Centre (above) and Bugis Junction Towers.ST PHOTO: CHEW SENG KIM

Higher returns from properties boost Reit's Q3 earnings despite lower property income

Better performance from its properties in Singapore and Sydney lifted earnings at Keppel Reit in the third quarter.

Income available for distribution rose 4.6 per cent to $54.4 million for the three months to Sept 30, it reported yesterday.

The increase was mainly due to higher returns from Ocean Financial Centre, Bugis Junction Towers and the premium office building 8 Chifley Square in Sydney.

Net property income fell 13.3 per cent to $33.4 million compared with a year ago, while property income dropped 11.4 per cent to $42.2 million.

The differences from a year ago were mainly owing to the sale of Prudential Tower on Sept 26 last year, said Keppel Reit.

  • AT A GLANCE

  • NET PROPERTY INCOME:

    $33.4 million (-13.3%)

    DISTRIBUTABLE INCOME:

    $54.4 million (+4.6%)

    DISTRIBUTION PER UNIT:

    1.7 cents (-8.1%)

This was partly offset by higher income from Ocean Financial Centre and Bugis Junction Towers.

Distribution per unit was 1.7 cents, down from 1.85 cents a year ago, which translates to an annualised distribution yield of 7.2 per cent.

Its manager, Keppel Reit Management, has 82 leases or about 1.1 million sq ft of office space, with 34 leases committed in the third quarter. The overall portfolio occupancy stood at 98.5 per cent as at Sept 30.

The Reit noted that a third of new office leases were from tenants new to Singapore, a third were new tenants in the Reit's portfolio and the rest were existing clients.

Most of the tenants were regional firms such as banks and financial institutions, and companies in the commodities and property sectors.

The Reit's new tenants include those from the insurance, accounting and the legal sectors.

The manager intensified lease management efforts to keep and attract tenants, "to mitigate the impact of office supply from both upcoming and existing buildings", it noted.

Keppel Reit's Singapore assets achieved a high tenant retention rate of 90 per cent in the quarter, while completing 100 per cent of all leases due for review this year.

"Despite the challenging leasing market sentiments, the manager has achieved a positive rent reversion averaging 16 per cent for office leases signed, renewed and reviewed to date," added the Reit.

Its manager also raised fixed-rate loans to more than 70 per cent in the quarter, which it said "will insulate against interest rate fluctuations and, at the same time, allow for operational and financial flexibilities".

The Reit added that it expects market conditions to be challenging as there will be more office supply over the next two years, not forgetting possible interest rate rises.

Keppel Reit units closed up half a cent at $1 yesterday.

A version of this article appeared in the print edition of The Straits Times on October 20, 2015, with the headline 'Keppel Reit lifted by S'pore, Sydney assets'. Print Edition | Subscribe