Keppel Reit H2 2024 DPU falls 3.4 per cent to S$0.028; manager confident of strong Singapore office demand

THE manager of Keppel Real Estate Investment Trust (Reit) reported distribution per unit (DPU) of S$0.028 for the second half ended Dec 31, 2024, falling 3.4 per cent from S$0.029 in the corresponding year-ago period.

It will be paid on Mar 17, after the ex date of Feb 5 and record date of Feb 6, said the Reit’s manager in a bourse filing on Monday (Jan 27).

Revenue for the period was S$136.5 million, up 15.5 per cent on-year from S$118.2 million. Net property income rose 13.6 per cent to S$105.1 million, from S$92.5 million year on year.

The increase was attributed to higher property income from T Tower, KR Ginza II, 2 Blue Street and 255 George Street. This was partially offset by lower net property income from Ocean Financial Centre and 8 Exhibition Street, due to higher property tax and a lower one-off income for 8 Exhibition Street.

Despite the increase in property income, distributable income from operations for H2 FY2024 fell 2.1 per cent to S$97.6 million from S$99.7 million in H2 FY2023. This was due mainly to higher borrowing costs, lower rental support, offset by better NPI and higher share of results of associates.

Including the anniversary distribution, distributable income for H2 FY2024 would have fallen 1.9 per cent to S$107.6 million from S$109.7 million in H2 FY2023.

Strength in Singapore offices

In an earnings call after the results, the manager’s chief executive Chua Hsien Yang noted that Singapore – where the majority of Keppel Reit’s portfolio is located – is likely to continue boasting healthy rental reversions, as the central business district (CBD) is “going to be very, very full”.

FY2024 rental reversion for Keppel Reit’s entire portfolio was 13.2 per cent. Jason Chua, director of asset management, said Singapore achieved rental reversion of 16.5 per cent for the fourth quarter.

Chua Hsien Yang, who took up the post on Jan 1, said that while a certain tenant in Ocean Financial Centre is planning to move out, more than half the space has already been backfilled, and rental reversions for this particular area are “in excess of 30 per cent”.

Media reports previously identified the tenant as French bank BNP Paribas.

Although some tenants have been looking to downsize, Chua Hsien Yang said there is still new demand for offices in the CBD, as companies have started to mandate working from the office. New tenants, such as family offices or professional services companies, are also shopping for space.

“A lot of new leases that we are negotiating… are still relatively large. They could be ranging between 40,000 to 50,000 square feet… So it’s not small by any standard,” he said.

For the full 2024 fiscal year, net property income grew 10.7 per cent to S$201.9 million from S$182.4 million in FY2023, driven by the same factors in H2 FY2024. Revenue was S$261.6 million, gaining 12.2 per cent from S$233.1 million a year ago.

Distributable income from operations for FY2024 fell 2.1 per cent to S$194.5 million from S$198.7 million in FY 2023. Including the anniversary distribution, FY2024 distributable income fell 1.9 per cent to S$214.5 million from S$218.7 million.

Distribution per unit for FY2024 fell 3.4 per cent to S$0.056 from S$0.058 in FY2023.

‘Comfortable’ gearing level

Keppel Reit is not currently looking to divest its assets or acquire new ones, despite its gearing standing at 41.2 per cent.

CEO Chua said he is “comfortable with this level”, but acknowledged the Reit will most likely be unable to gear up any further at the current stage.

“We need to figure out how we want to manage our gearing, (and) at the same time look to add to the portfolio… but we have not earmarked any assets for active divestment at this point in time,” he said.

As for borrowings, those due in 2025 will mature in the first half of the year. The manager said it is in various stages of refinancing, including discussions with the lenders and documentation of facility agreements.

“Looking ahead, our focus remains on proactive asset management to capitalise on the flight-to-quality trend, and we continue to be disciplined in capital management to deliver sustainable long-term total return to the unitholders,” he said.

Units of Keppel Reit ended down 1.1 per cent or S$0.01 to S$0.86, before the announcement.