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Keppel REIT saw its net property income drop 5.4 percent to 31.6 million in Q3 2016, primarily due to the absence of income from 77 King Street.
Share of results of associates jumped 33.2 percent year-on-year to S$24.7 million while share of results of joint ventures doubled to $7.9 million in Q3 2016. The increase was due mainly to higher share of contribution from Marina Bay Financial Centre and One Raffles Quay in Singapore as well as David Malcolm Justice Centre in Perth, Australia.
With this, distribution per unit (DPU) fell 5.9 percent to 1.60 cents in Q3 2016 from 1.70 cents previously.
Nonetheless, its manager revealed that all of Keppel REIT’s properties in Raffles Place and Marina Bay were 100 percent leased.
In fact, rent reversion for the first nine months of the year were positive at around three percent.
Credit Suisse noted that 75 percent of the new leases signed during the first nine months of 2016 were from ‘flight-to-quality’ tenants while 15 percent were expansions by existing tenants and 10 percent were new to Singapore.
“KREIT managed to forward renew some leases in 2017 which brings the amount of expiries during that year to 5.2 percent of portfolio NLA, while rent reviews will account for four percent of portfolio NLA,” it said.
With overall portfolio remaining almost full at 99.5 percent in Q3 2016, Keppel REIT achieved a tenant retention rate of 98 percent for the first three quarters of 2016.
“New tenants secured in 2016 were mainly from the banking, financial and insurance, legal, real estate and property services, technology, media and telecommunications (TMT), government agency as well as energy, natural resources, shipping and marine sectors,” said its manager.
Rated neutral, Keppel REIT“currently trades at a 2016 yield of 5.9 percent”, said Credit Suisse.
“Limited expiries in 2017 will mitigate the impact from declining office rents but potential for DPU growth remains limited,” it added.
Nikki De Guzman, Editor at PropertyGuru, edited this story. To contact her about this and other stories, email nikki@propertyguru.com.sg.
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