Keppel-KBS US REIT reports 3Q18 net property income in-line with IPO forecasts

U.S. five dollar currency notes bills; taken September 2018.U.S. five dollar currency notes bills; taken September 2018.

Keppel-KBS US REIT’s third-quarter net property income was US$13.59 million, in line with its IPO forecast, the REIT manager said on Wednesday, attributing the performance to strong leasing momentum, positive rental reversion and lower property expenses.

Gross revenue for the quarter was US$22.67 million, around 2 percent below the IPO forecast, mainly due to an early lease termination at Westmoor Center in Denver, Colorado in the first quarter and lower recoveries due to lower property expenses, the REIT manager said in a filing to SGX after the market close on Wednesday.

The space at Westmoor Center has since been taken up by an expanding tenant, with the cash rental contribution to begin in December, the REIT manager said.

Property expenses for the quarter were US$9.08 million, 4.8 percent below the IPO forecast, the REIT manager said.

The distribution per unit (DPU) was 1.50 U.S. cents for the quarter, 0.7 percent higher than the IPO forecast, it said.

Keppel-KBS US REIT was listed on 9 November 2018 and there aren’t comparative figures for the year-earlier quarter, it said.

Leasing momentum in the quarter was strong, with 134,000 square feet committed across 18 leases, bringing committed occupancy to 90.1 percent as of 30 September, the REIT manager said.

“Given the rising office rents in most of the markets where the assets are located, the well-spread lease expiry profile will provide positive upside for the REIT when expiring leases with lower rents are marked to market,” it said.

Keppel-KBS US REIT also said in September that it proposed acquiring the Westpark Portfolio in Redmond, marking the REIT’s third asset in the Seattle-Tacoma-Bellevue area in Washington state.

The REIT manager noted that Keppel-KBS US REIT has been included in the Singapore Exchange’s new FTSE ST Singapore Shariah Index.

“Inclusion in this Index, alongside that of the MSCI Singapore Small Cap Index will raise Keppel-KBS US REIT’s visibility among investors, thereby improving trading liquidity,” it said.

In its outlook, the REIT manager said the stronger job market in the U.S. has kept demand for office space robust.

“The REIT, with assets located in key growth markets in the West Coast, Central, and East Coast, is well-placed to benefit from organic growth, largely from improved occupancies and built-in rental escalations in its portfolio,” it said. “Office demand in these markets is underpinned by strong and defensive sectors such as technology, education and healthcare.”

It said it was actively pursuing acquisitions in key growth markets where the REIT has a presence and in other U.S. cities with similar growth characteristics.

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