Keppel REIT saw higher rentals at Ocean Financial Centre in Raffles Place
SGX-listed Keppel REIT reported first-quarter net property income of S$48.2 million ($35.4 million), up 7.2 percent from a year earlier, underpinned by higher Singapore rentals and the contribution from a completed office project in Sydney.
The NPI increase was supported by strong demand for prime office space in the four-asset Singapore portfolio, with rental reversion up 10.9 percent in the first three months of 2024, the commercial property trust’s manager said Tuesday in a business update.
Committed occupancy in the $6.6 billion trust’s overall portfolio — comprising interests in 12 properties across Singapore, Australia, Japan and South Korea — was 96.4 percent as of 31 March, with a weighted average lease expiry of 4.6 years.
“Notwithstanding the stronger operating performance, distributable income including anniversary distribution remained at S$55.2 million due mainly to higher borrowing costs,” said the manager, which is owned by Temasek-backed Keppel Ltd.
Blue Street Bounce
Keppel REIT’s first-quarter metrics got a boost from the April 2023 completion of 2 Blue Street in North Sydney. The trust had acquired the wholly owned office development in 2021 from Hong Kong’s Phoenix Property Investors and Australian developer Thirdi for A$327.7 million (then $234.1 million).
Wee Lih Koh, CEO of Keppel REIT’s manager
The Grade A building at the intersection of Blue Street and William Street provides 152,009 square feet (14,122 square metres) of net lettable area, with committed occupancy reaching 66.4 percent at the end of December from tenants including credit scorer Equifax and rail freight operator Pacific National.
In Singapore, average Grade A office rents in the core CBD rose to S$11.95 ($8.77) per square foot per month in the first quarter of 2024 from S$11.90 in the previous three months, according to CBRE data cited by Keppel REIT.
Average occupancy in the Lion City’s core CBD — where the trust is invested in Ocean Financial Centre, Marina Bay Financial Centre and One Raffles Quay — increased from 94.8 percent at the end of 2023 to 95.1 percent at the end of March.
Portfolio Fine-Tuning
At the start of April, Keppel REIT announced plans to acquire a half stake in an office tower in central Sydney from a fund managed by Mirvac for A$363.8 million ($237.1 million). The trust is buying 255 George Street, a 29-storey Grade A building near the harbourfront, at a yield of more than 6 percent, as it continues to ramp up its presence in its biggest market outside of Singapore.
Also this month, the Korea Economic Daily reported that Keppel REIT was set to choose a buyer for its T Tower office building near Seoul station. The trust had acquired the 28-storey property in 2019 for KRW 252.6 billion (then $221 million) from a fund managed by PGIM Real Estate.
“Delivering sustainable long-term total return to the unitholders remains a key focus for Keppel REIT,” the manager said in the business update, adding that it would continue to adopt a prudent stance towards capital management and a proactive approach in managing the portfolio.