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Reit manager's chief bullish on US office rents

Keppel-KBS US Reit manager's chief David Snyder said the Reit's portfolio offers diversity in terms of asset location, as well as across tenants and industries.
Keppel-KBS US Reit manager's chief David Snyder said the Reit's portfolio offers diversity in terms of asset location, as well as across tenants and industries.PHOTO: SGX

Keppel-KBS US Reit well placed to explore and tap opportunities

Businessman David Snyder tackles food in much the same way he does corporate life, with a readiness to savour new and different things.

Mr Snyder, chief executive of the manager of Keppel-KBS US Reit, has an adaptable, inclusive leadership style that helps him maximise outcomes in the face of complexity and change.

"I'm always open to trying something new," he said, noting that his favourite foods include laksa, chilli crab, satay and roti prata. He also eats durians.

"Flexibility is important in life and work, especially when it comes to managing various stakeholders in the trust, as well as different tenants and assets in the portfolio."

Mr Snyder, 46, attributes his love for Asian cuisine to having been born here and studying in the Singapore American School from 1980 to 1989.

"I was rubbing shoulders with people from more than 60 different nationalities. Some of my closest buddies were Filipinos, Indians and Chinese, and I learnt so much from all these different cultures."

The Bachelor of Science in Business Administration graduate from Biola University in La Mirada, California, began his career in 1993 as an accountant with Arthur Andersen, before taking on various financial roles in the United States healthcare and real estate sectors.

RESPECT AND KINDNESS

My dad taught me to take responsibility, but give away the credit - we should treat people as equals and better than ourselves... More importantly, a smile and a kind word will always go a long way.

MR DAVID SNYDER, chief executive of the manager of Keppel-KBS US REIT.

He joined US-based KBS in 2008 as chief financial officer, a role that included managing a portfolio transfer of more than 800 properties valued at over US$1 billion.

In 2015, he took a consultant role with KBS, where he oversaw the property portfolio and assisted in formulating its operational strategies and tactics.

Two years later, Mr Snyder was appointed CEO of Keppel-KBS US Reit Management, the manager of Keppel-KBS US Reit.

The Reit, which listed here on Nov 9, is the second US-focused office Reit on the Singapore Exchange. It has an initial portfolio of 11 freehold properties in seven US growth markets with an appraised value of nearly US$830 million (S$1.1 billion). Its assets are found in such centres as Seattle, Houston, Denver and Atlanta.

The portfolio has an occupancy rate of 90 per cent and a stable lease expiry profile of 3.7 years, with no single year having more than 20 per cent of total leases expiring. This ensures stable cash flows.

The Reit has gained about 1.1 per cent from its initial public offer price of 88 US cents a unit.

Its policy is to pay out 100 per cent of annual distributable income from the listing date to end of 2019, and at least 90 per cent on a semi-annual basis after that.

The Reit is backed by two sponsors - Keppel Capital Holdings, the asset management arm of Keppel Corporation, and KBS Pacific Advisors. Both have strong expertise in fund management and commercial real estate.

KBS has more than US$11 billion in assets under management and was ranked the 11th largest US owner of office properties globally by National Real Estate Investor as at the end of last year.

Mr Snyder said the prospects for the markets the Reit invests in remain bright with office rents expected to keep rising.

"Many of our target markets are live-work-play environments where talents thrive and jobs grow.

"Apart from the usual gateway cities and financial hubs of San Francisco, New York City, Chicago and Boston, expansion is also taking place in other markets, such as Austin, Charlotte, Salt Lake City and Seattle."

Such up and coming cities have food, music, sports and cultural trends that have attracted people, particularly the young, mobile and educated workforce.

"For example, a younger crowd is flocking to Denver to pursue outdoor lifestyles like skiing and cycling, as well as the developing coffee, beer and wine scenes," he added.

To grow inorganically, Keppel-KBS US Reit will explore opportunities to acquire suitable properties in these target markets.

"KBS already has boots on the ground and can assist us in obtaining assets, such as suburban properties, which are in great neighbourhoods or near malls, and cater to tenants who do not want a daily city commute," Mr Snyder said.

"KBS also has advantages in selling to us - the transaction will have fewer costs and a quicker completion process."

The Reit has opportunities to purchase assets from third parties that can deliver positive returns and long-term growth.

"An average US$100 billion of transactions take place annually in the US; there's no lack of assets. Instead, what is more important is how we evaluate and select the right asset that will benefit unit holders over the longer term."

In terms of organic growth, the firm will focus on bringing in the right tenants and managing occupancies at optimal levels. "Our portfolio offers diversity in terms of asset location - suburban and CBD - as well as across tenants and industries," Mr Snyder said.

The portfolio has a varied base of 340 tenants, led by those in defensive and growth sectors, such as technology, financial and professional services and healthcare.

Yield growth is driven by built-in rental escalations ranging from 2 to 3 per cent for about 97.5 per cent of the leases. There are opportunities to renew expiring leases at higher market rates as well as growing occupancy levels by adopting a proactive leasing strategy.

While occupancy levels for commercial property here run as high as 95 per cent or 100 per cent, those in the US usually range between 92 and 95 per cent, Mr Snyder noted.

"At these levels, the occupancy rates are high enough to drive rentals, and still offer room for tenants who want to expand operations and increase their space."

He believes the Reit manager's joint-venture structure adds a strong competitive edge.

"The Keppel-KBS partnership enhances the expertise of both parties - Keppel has financial capabilities and experience with Asian investors and capital markets, while KBS brings along a deep knowledge and understanding of the US real estate market."

KBS also offers its particular brand of "magic". The firm provides opportunistic and value-added enhancements for assets that have low occupancy rates or ones that are not being well managed.

"Basically, it gets properties ready so they can be leased out more easily," added Mr Snyder.

Apart from managing the day-to-day operations, he is focused on building trust, loyalty and camaraderie within the team: "One individual does not a successful organisation make, and I prefer to focus on the team rather than on me."

The father of two boys and two girls aged 11 to 18 constantly emphasises the need for honesty and integrity. "I always tell my kids they must stand up for what's right, even when it's hard. Building a reputation for integrity is difficult, and can be lost in an instant."

Another imperative is treating others with respect and kindness. "My dad taught me to take responsibility, but give away the credit - we should treat people as equals and better than ourselves," he added.

"More importantly, a smile and a kind word will always go a long way."

•This is an excerpt from Singapore Exchange's Kopi-C: The Company Brew, a regular column featuring C-level executives of SGX-listed companies. Previous editions can be found on SGX's My Gateway website www.sgx.com/mygateway

A version of this article appeared in the print edition of The Straits Times on December 18, 2017, with the headline 'Reit manager's chief bullish on US office rents'. Print Edition | Subscribe