3 Things Investors Should Know About Keppel REIT’s Business Now
Keppel REIT (SGX: K71U) is a real estate investment trust with a focus on commercial properties. Its portfolio currently consists of nine office assets located in Singapore (four) and Australia (five).
In Singapore, the REIT has stakes in properties such as Ocean Financial Centre, Bugis Junction Tower, Marina Bay Financial Centre, and One Raffles Quay.
Here are three things about Keppel REIT’s business that investors may want to take note of right now.
The latest results
Here’s a table showing the important highlights from Keppel REIT’s income statements for the second quarters, and first halves, of 2017 and 2016:
Source: Keppel REIT 2017 second quarter earnings presentation
It’s worth noting that the REIT’s property income, net property income, share of results from associates and JVs, and distribution per unit, had all decline in the second quarter and first half of 2017 when compared to the corresponding periods a year ago.
The negative performance in the first half of 2017 was driven by a few factors, namely, the absence of income from 77 King Street (the property was sold on January 2016), lower income contribution from Bugis Junction Tower, and the absence of a divestment gain from the aforementioned sale of 77 King Street.
High occupancy rates
The occupancy rate for a REIT is an important metric to look at since it gauges the strength of the market demand for the REIT’s properties. The following chart shows the REIT’s occupancy rates:
Source: Keppel REIT 2017 second quarter earnings presentation
We can see that all of Keppel REIT’s properties have higher occupancy rates than their respective market averages!
Long lease expiries
A REIT’s lease expiry profile is useful to study because it gives us insight on the stability of the REIT’s rental income.
The chart below shows Keppel REIT’s weighted average lease expiry (WALE), and its lease expiry profile:
Source: Keppel REIT 2017 second quarter earnings presentation
What’s useful to know here is that only 2% of Keppel REIT’s leases (by net lettable area) will expire in 2017, while more than 51.4% will expire only after 2022.
The long lease expiries provide strong visibility for Keppel REIT’s income in the next few years.
