Keppel Reit plans to initiate unit buybacks to enhance long-term returns for unit holders of the trust, which its manager believes is undervalued.
The distribution reinvestment plan will be suspended in the light of this move, the manager of the trust said last night as it announced flat second-quarter distribution per unit (DPU).
The manager intends to buy back up to around 1.5 per cent of issued units over six months.
Keppel Reit posted DPU of 1.42 cents in the second quarter, unchanged from the same period last year.
The trust, which owns office assets in Singapore and Australia, said income available for distribution for the three months to June 30 rose 1.9 per cent to $48.32 million.
Gross revenue expanded 29.6 per cent to $51.65 million. Net property income (NPI) rose 35.5 per cent to $43.21 million. The increases were due largely to a rise in one-off income on early surrender of leases for Singapore assets.
AT A GLANCE
NET PROPERTY INCOME: $43.2 million (+35.5%)
INCOME AVAILABLE FOR DISTRIBUTION: $48.3 million (+1.9%)
DISTRIBUTION PER UNIT: 1.42 cents (unchanged)
While gross revenue and NPI from Bugis Junction Towers and Ocean Financial Centre (OFC) rose, these were partly offset by lower gross revenue and NPI from 275 George Street in Brisbane.
Rental support declined 38.2 per cent to $2.15 million - due to the absence of rental support for OFC and lower rental support for Marina Bay Financial Centre (MBFC) Tower 3. Share of results of associates slipped 8.5 per cent to $18.98 million. Borrowing costs and the manager's management fees were up slightly.
The modest 1.9 per cent growth in distributable income - despite substantial gains in gross revenue and NPI - was also due to the timing differences of receipt of dividend or distributable income, and adjustments made on differences between accounting and tax treatments of distributions.
DPU remained flat amid an expansion in the number of units in issue to 3.4 billion as of June 30, from 3.34 billion as of the end of June last year.
The manager noted that there is no refinancing requirement until next year. As of the end of the second quarter, aggregate leverage remained stable at 38.6 per cent and weighted average term to maturity was 2.9 years.
Committed occupancies for the Singapore portfolio were 99.9 per cent as of June 30 and 97.1 per cent for the Australian assets, well above the respective market averages.
The average signing rent for the Singapore office leases concluded in the first half of this year was about $10.74 per sq ft a month.
In Singapore, the trust owns 99.9 per cent of OFC, one-third interest in One Raffles Quay as well as MBFC office Towers 1, 2 and 3 and the underground Marina Bay Link Mall. It fully owns Bugis Junction Towers. It also has investments in Melbourne, Sydney, Brisbane and Perth.
Keppel Reit units closed one cent down at $1.14 yesterday. Unit holders will get the payout on Aug 28.