Keppel REIT announced higher year-on-year (y-o-y) distributable income of $54.0 million for 4Q 2015 and $217.3 million for FY 2015, which is 17.8% and 5.4% above the corresponding periods in 2014 respectively, and is constant on a quarter-on-quarter (q-o-q) basis.
The improvement in distributable income was due mainly to higher property income from all its assets in Singapore and Australia, as well as higher contributions from share of results of associates and share of results of joint ventures. The Manager is declaring a distribution per unit of 1.68 cents for 4Q 2015, amounting to a total of 6.80 cents and a yield of 7.3% for FY 2015.
During the quarter, Keppel REIT’s gearing level was reduced significantly by approximately 8% to 39.3% due mainly to lower borrowings and revaluation gains from Keppel REIT’s investment properties in end-2015. Safeguarding the REIT against interest rate volatility and providing certainty of interest expenses as well as financial and operational flexibility, fixed rate loans were maintained at 70%. Average cost of debt remained stable at 2.5% and interest coverage ratio at a healthy 4.4 times.
Keppel REIT has also completed almost 100% of its refinancing requirements in 2016, and continued to maintain a well-staggered debt maturity profile with weighted average term to expiry at a healthy 3.7 years. In addition, the Manager has hedged almost 100% of its income from Australia up till 3Q 2016.
The Manager’s proactive marketing and rigorous leasing efforts saw a total of 114 leases concluded for 2015, equivalent to approximately 1.6 million sf (attributable space of approximately 800,000 sf) of prime office space. This is approximately 23% of Keppel REIT’s net lettable area under management.
As at end-2015, Keppel REIT’s committed portfolio occupancy remained high at 99.3%.
Of the total new leases signed during the year, half were from tenants who were new to Keppel REIT’s portfolio, while one quarter were from tenants new to Singapore, and the remaining one quarter were expansions by existing tenants.
In managing the impending office supply spike over these two years, the Manager has been channelling its efforts to retain existing tenants and attract new tenants. Such efforts saw the Manager achieve a high tenant retention rate of 90% and a 13% positive rent reversion for its Singapore portfolio for 2015.
For leases expiring in 2016, the Manager is already in advanced negotiations with these tenants and is likely to achieve a high retention. Similarly, for leases expiring in 2017, the Manager is proactively engaging these tenants and is likely to renew most of the leases as the majority of these tenants are in their first renewal cycle. Approximately 75% of total leases are not due for renewal till 2018 and beyond, when limited new office supply is expected.
In ensuring long-term income sustainability, the Manager continued to maintain a healthy weighted average lease expiry of approximately eight years and six years for Keppel REIT’s top 10 tenants and overall portfolio respectively as at end-2015.
Looking ahead, the Manager remains committed to deliver sustained returns through harnessing strengths to capture greater value for its Unitholders. The Manager will also continue to maintain a healthy and long lease expiry profile, and adopt a disciplined approach towards mitigating financing, interest rates and foreign exchange risks.