Keppel Reit H1 DPU up 1% on Keppel Bay Tower contribution

Keppel Reit reported a 1 per cent year-on-year increase in H1 2022 distribution per unit (DPU) to S$0.0297 from S$0.0294 previously.

The Reit manager announced a 4.6 per cent growth in H1 distribution to unitholders to S$110.5 million from S$105.7 million in a regulatory filing after market close on Tuesday (Jul 26).

Property income and net property income rose in tandem with distribution to unitholders and DPU. Property income in the period rose 3.7 per cent to S$109.8 million from S$105.8 million a year ago, while net property income was up 6 per cent to S$89.5 million, from S$84.4 million previously.

The increase was mainly driven by the contribution from Keppel Bay Tower and higher net property income from Ocean Financial Centre, 8 Exhibition Street and Pinnacle Office park. This was partially offset by the lack of contribution from 275 George Street post-divestment and lower net property income from Victoria Police Centre and T Tower due to weaker foreign currency exchange rates.

Keppel Reit’s committed occupancy rate stands at 95.5 per cent with the portfolio top 10 weighted average lease expiry standing at 6 years. Tenant retention rate was 89 per cent for H1 2022.

About 881,900 square feet of space was committed in H1, with the majority of the leases concluded in Singapore. The weighted average signing rent for Ocean Financial Centre, Marina Bay Financial Centre and One Raffles Quay was approximately S$11.43 psf per month for the first half.

The Reit manager said it would focus on maintaining stable and sustainable distribution while achieving long-term growth.

At a briefing accompanying the result announcement, Rodney Yeo, the Reit manager’s head of asset management, shared that the office market is on a tear lately in the CBD as supply is tight, causing rents to move up “very quickly” in May and June.

Therefore, the Reit witnessed positive rental reversions of 8.7 per cent across its entire portfolio in the first half of 2022, with the second quarter’s reversions coming in at 7.5 per cent, he pointed out.

“If we blend the leases in documentation together with the second quarter, those that actually signed in the second quarter, we are possibly in the double-digit range for reversions,” he added.

As at June 30, occupancy at Ocean Financial Centre, One Raffles Quay and Keppel Bay Tower has fallen to 92.8 per cent, 93.8 per cent and 95.3 per cent respectively, from 94.6 per cent, 98.5 per cent and 96.4 per cent as at end 2021.

Asked what caused the decline, Yeo said it was “just timing”, reiterating that a number of leases are in documentation at the moment. If those leases were taken into consideration, occupancies will probably stand in the 97-98 per cent range.

Positive rental reversions for its Singapore CBD portfolio is at about 11 per cent, he revealed.

As Keppel Reit only has a one-third stake in Marina Bay Financial Centre and One Raffles Quay, a question was posed to the Reit manager if it would be interested to take up additional one-third stakes in these properties.

Shirley Ng, its deputy chief executive officer and head of investments, divulged that it “definitely will be keen” to look at acquiring larger stakes as they are prime assets in the Reit’s portfolio. “We are very happy with our one-third stake,” she said.

Units of Keppel Reit closed 1.9 per cent or S$0.02 higher at S$1.10 on Tuesday.