Keppel-KBS US Reit posts 2.32 US cents in DPU post-listing

KEPPEL-KBS US Reit delivered distribution per unit (DPU) of 2.32 US cents for the period since listing from Nov 9, 2017 to March 31, 2018, beating its forecast by 0.4 per cent.

This translates to an annualised distribution yield of 6.73 per cent based on the unit trading price of US$0.88.

Thanks to a stable portfolio performance and a one-off compensation income, the Reit's net property income of US$22.3 million surpassed its IPO forecast by 5.2 per cent.

The one-off compensation income of US$1 million came from a tenant at Westmoor Center in Denver, Colorado, who was granted permission to terminate its lease on Feb 28, 2018, ahead of its lease expiry in mid-2019.

This was related to a new lease commencing July 2018 for an existing tenant that wanted to expand into the space, the Reit manager explained.

"The one-off income was commercially negotiated to offset the anticipated drop in rental income, and will be used to offset the anticipated drop in distribution from Q2 2018 to Q4 2018 in relation to the downtime and rent-free period for this space," said Keppel-KBS US Reit management.

It added that there was positive leasing momentum from the time of IPO till Q1 2018, with the Reit manager signing 32 leases spanning more than 252,000 sq ft during this period.

The leasing demand for new spaces was mainly driven by tenants in the technology, financial services and manufacturing sectors. As at March 31, 2018, Keppel-KBS US Reit's committed portfolio occupancy for its 11 freehold office properties was 89.8 per cent, down slightly from 90 per cent as at Sept 30, 2017.

As at March 31, 2018, the aggregate leverage of the Reit stood at 33.6 per cent, with all-in average borrowing costs of 3.4 per cent and weighted average term to maturity of 4.1 years.

"To capture further upside from improving office market conditions, the manager will also seek acquisition opportunities in key growth markets it currently has a presence in, as well as other US cities with similar growth characteristics," the Reit manager said.