UPDATE: Keppel REIT: 3Q18 net property income fell nearly 11 percent, missing analyst forecast

Singapore two-dollar bills

Keppel REIT reported on Monday that its net property income for the third quarter fell 10.9 percent on-year to S$28.20 million amid lower income from Ocean Financial Centre, 275 George Street and 8 Exhibition Street.

That was partially offset by higher property income from Bugis Junction Towers, the REIT’s manager said.

Property income for the quarter ended 30 September fell 9.4 percent on-year to S$36.66 million the REIT’s said in a filing to SGX after the market close on Monday.

The distribution per unit (DPU) for the quarter was 1.36 Singapore cents, down 2.9 percent on-year from 1.40 Singapore cents in the year-earlier quarter, it said.

Those results came in below Daiwa’s forecast for revenue of S$40.6 million, net property income of S$32.7 million and a DPU of 1.46 Singapore cents.

Property income from Bugis Junction Towers was up 2.8 percent on-year to S$5.08 million in the quarter, while Ocean Financial Centre property income fell 7.7 percent on-year to S$23.86 million, 275 George Street property income was 27.1 percent lower at S$3.45 million and 8 Exhibition Street property income was down 13.4 percent on-year at S$4.26 million, it said.

“The manager has rolled out enhancement initiatives at 275 George Street to attract and retain tenants. Similar initiatives have been planned at 8 Exhibition Street to enhance tenants’ experience and optimize asset performance,” Keppel REIT’s manager said.

In its outlook, the REIT manager pointed to CBRE data showing Singapore office occupancy in the core central business district (CBD) rose to 94.6 percent at end-September from 94.1 percent at end-June, with average Grade A rents also rising.

“The office market outlook remains positive in view of a tapering supply pipeline and continued demand from a wide range of sectors,” Keppel REIT’s manager said.

In Australia, JLL said national CBD office average occupancy also increased, to 90.6 percent at end-June from 90.1 percent at end-March, the statement said.

“Amidst a positive business outlook, healthy leasing activities were observed from various sectors, including the finance, insurance and flexible working space industries, which are expected by JLL to contribute towards tightening vacancy and rental improvement,” the REIT manager noted.

For the nine-month period ended 30 September, Keppel REIT said its net property income rose 8.1 percent on-year to S$102.63 million, while its property income increased 6.6 percent on-year to S$128.04 million.

Its nine-month DPU was 4.2 Singapore cents, down 1.6 percent from 4.27 Singapore cents int he year-earlier period, it said.

Portfolio occupancy was high at 98.0 percent, with a portfolio retention rate of 84 percent as of 30 September, the REIT’s manager said.

It noted that in the third quarter, HSBC signed a 10-year lease for its new headquarters at Marina Bay Financial Centre Tower 2, with target occupation by April 2020.

“The addition of an established tenant on a long tenure is testament to the asset’s quality and ability to attract tenants,” Keppel REIT said in the statement.

Keppel REIT’s portfolio has nine office assets across Singapore, Sydney, Melbourne, Brisbane and Perth, it said.

In Singapore, it has a 99.9 percent interest in Ocean Financial Centre, a one-third interest in Marina Bay Financial Centre’s office towers 1, 2 and 3 and the subterranean Marina Bay Link Mall, a one-third interest in One Raffles Quay and 100-percent interest in Bugis Junction Towers, it said.

In Australia, the REIT’s portfolio includes a 50 percent interest in Sydney’s 8 Chifley Square, a 50 percent interest in the office building at 8 Exhibition Street in Melbourne and 100 percent interest in three retail units, a 50 percent interest in 275 George Street in Brisbane and a 50 percent interest in David Malcolm Justice Centre in Perth. It also has a 50 percent stake in an office tower under construction at 311 Spencer Street in Melbourne, it said.

This article was originally published on Monday 15 October 2018 at 17:54; it has since been updated.