Keppel Reit H1 DPU falls by 2.9% to S$0.0272
Distributable income from operations down by 1.4% at S$95.5 million
[SINGAPORE] Keppel Real Estate Investment Trust (Reit) on Wednesday (Jul 30) reported a 2.9 per cent decline in its distribution per unit (DPU) for the first half of the 2025 financial year to S$0.0272, from S$0.028 in the corresponding year-ago period.
Distributable income from operations fell by 1.4 per cent to S$95.5 million for the period from S$96.9 million in H1 FY2024.
The distribution will be paid out on Sep 15, with its record date on Aug 7.
Property income rose 9.1 per cent to S$136.5 million from S$125.1 million in the same period a year prior, largely due to contribution from assets in Sydney, Australia, namely 255 George Street acquired in May 2024, and higher occupancy at 2 Blue Street.
Net property income (NPI) increased by 11.8 per cent year on year to $108.3 million for H1, from S$96.8 million in the corresponding period a year before.
Based on annualised DPU for H1 and its market closing price of S$0.885 per unit as at Jun 30, the distribution yield stood at 6.1 per cent for the period, down 0.3 percentage points from 6.4 per cent in H1 FY2024.
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The portfolio occupancy of Keppel Reit was recorded at 95.9 per cent, and rental reversion was at 12.3 per cent.
Aggregate leverage stood at 41.7 per cent as at Jun 30, with 63 per cent of its total borrowings on fixed rates. The weighted average cost of debt was 3.51 per cent per annum for H1, with an interest coverage ratio of 2.6 times.
Cost of debt expected to lower
There are no significant borrowings maturing for the remainder of 2025, according to the manager of the Reit.
The weighted average lease expiry for the portfolio was 4.8 years, as compared with 4.7 years as at Mar 31.
Speaking at Keppel Reit’s earnings briefing on Wednesday, Sebastian Song, the chief financial officer of the manager, said that he believes the Reit’s cost of debt has peaked.
“Coupled with the lower margins of gain during our debt refinancing exercise in 2025 as well as further cuts expected (in) certain benchmark rates, we anticipate a gradual decline in borrowing costs as floating rate borrowings are repriced favourably,” he added.
The reduction in Keppel Reit’s cost of debt will be more apparent in the second half of this year if the Singapore Overnight Rate Average (Sora), which is the interest-rate benchmark for Singapore dollar loans, continues to come down, said Song.
The bulk of the Reit’s floating debt, or 75 per cent, is denominated in Singapore dollars while 25 per cent is in Australian dollars and the remaining debt in South Korean won.
For H1, Keppel Reit committed approximately 1.2 million square feet (sq ft) (attributable area of about 559,000 sq ft) of leases.
New and expansion demand was primarily driven by the banking, insurance and financial services as well as the technology, media and telecommunications sectors, said the Reit’s manager.
The trust’s S$9.4 billion portfolio comprises commercial properties located in the key business districts of South Korea, Japan, Australia (which makes up 17.5 per cent of its portfolio) and Singapore (78.6 per cent of its whole portfolio).
In particular, the manager of the Reit observed improved performance in the Singapore portfolio due to higher rentals, and emphasised that contributions from 255 George Street and increased occupancy at 2 Blue Street, offset partially by a stronger Singapore dollar, led to a higher NPI.
Chua Hsien Yang, chief executive of the manager, said: “We made good progress in backfilling vacancies at Ocean Financial Centre in Singapore and 255 George Street in Sydney, Australia, increasing their occupancies to 96.1 per cent and 99 per cent, respectively. In addition, we refinanced the majority of loans maturing in 2025 at lower margins.”
Asked whether Keppel Reit could raise rents for its Central Business District properties in Singapore, Chua said that he still sees demand from tenants looking to expand, despite elevated rents. These occupiers are seeking more space to foster a “social setting” for employees in the city, he noted.
He added there were no plans to divest any of the Reit’s Singapore assets at this time as the market is strong. It is also “premature” to sell its two assets in Japan and South Korea, he said. The manager noted that its Japan asset has rental reversions in the high single digit, which is more than the market average. It had also recently signed a lease for its South Korea property, with a 30 per cent higher rent.
On acquisitions, Chua noted that the manager is not actively looking to diversify its portfolio, which is mostly made up of premium office assets. That said, the manager will consider diversifying its assets on a “case-by-case” basis if there is strategic value to do so.
He added: “Looking ahead, we remain focused on driving asset performance and maintaining disciplined capital management, while navigating evolving market conditions with agility.”
Units of Keppel Reit closed 2.1 per cent or S$0.02 up at S$0.97 on Wednesday.
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