Keppel-KBS US Reit registers IPO prospectus

KEPPEL-KBS US Reit has registered its prospectus for its initial public offering (IPO) with the Monetary Authority of Singapore, which will raise gross proceeds of US$553.1 million.

It is offering 262.77 million shares at 88 US cents apiece.

The offering consists of an international placement of 228.68 million units to investors outside the US ,and an offering of 34.09 million units to the Singapore public.

Separately, the cornerstone investors have agreed to subscribe for 246.37 million units, while the joint sponsors - who own the real estate investment trust (Reit) manager - are subscribing for some 119.43 million units at the offer price.

Backed by Keppel Capital and KBS Pacific Advisors as joint sponsors, Keppel-KBS US Reit's initial portfolio comprises 11 freehold office properties valued at US$829.4 million in seven growth cities in the US.

"Keppel-KBS US Reit offers unitholders a strong and unique value proposition of attractive distributions with strong visible organic growth," said David Snyder, CEO and chief investment officer of the Reit manager.

"Driving this positive momentum is the favourable outlook in the office real estate sector, especially in key markets where the properties comprising Keppel-KBS US Reit's IPO portfolio are located. These are markets where economic, population and employment growth have exceeded and is projected to continue to expand above the US national average, and where asking rents for office spaces are expected to see a continued upward trend."

Christina Tan, CEO of Keppel Capital, the asset management arm of Keppel Corporation, said that the listing of Keppel-KBS US Reit is part of Keppel's aim to grow its fund management business, expand its geographic footprint into the stable US market, and tap growing demand by global investors for attractive US real estate investments.

"The Reit will be able to draw on Keppel Capital's expertise in the management of listed Reits and strong relationships with Asian investors, as well as KBS' established investment and asset management experience in US commercial real estate," Ms Tan said.

Keppel-KBS US Reit's distribution yield for 2018 is estimated to be 6.8 per cent, with an expected distribution yield of 7.2 per cent for 2019, reflecting a total return of 12.6 per cent.

The Reit's yield growth is driven by built-in rental escalations ranging from 2-3 per cent for about 97.5 per cent of the portfolio leases, the opportunity to renew expiring leases at potentially higher market rent rates, as well as potential growth in portfolio occupancy.

The pipeline of potential acquisitions will come from third-party vendors through the sponsors' deal origination capabilities.

Keppel-KBS US Reit has a distribution policy to pay out 100 per cent of its annual distributable income from the listing date to the end of 2019. It will subsequently distribute at least 90 per cent of annual distributable income on a semi-annual basis.

Distributions will be declared in US dollars, and unitholders will receive distributions in Singapore dollars, equivalent to the US dollar distribution declared. Unitholders can also choose to receive their distribution in US dollars.