Keppel income ahead 20.7% in first quarter
The rise, which equated to annualised distribution per unit of S7.99¢, came from an increase in occupancy from its 77 King Street property, and the near completion of the Marina Bay Financial Centre and the Ocean Financial Centre in Singapore. It will also receive a boost next year when rents come in from the new lease by QBE Insurance at 8 Chifley Square.
Keppel REIT now owns four premium assets in Australia - the office tower at 77 King Street and a 50 per cent interest in 8 Chifley Square, a half-share in 275 George Street in Brisbane, as well as a 50 per cent interest in the new office tower to be built on the site of the Old Treasury Building in Perth. Its directors said Keppel REIT would look to expand its presence in Australia through the acquisition of premium-grade assets. The group said the Australian economy had registered stronger than expected growth in employment. "In the Sydney CBD office market, increased demand and removal of some existing office buildings for redevelopment have contributed to the relatively stable occupancy rates," the directors said.
They said rental rates for prime offices had held firm at $811 per square metre a year.
Property analysts have estimated QBE would pay about $1300 per square metre for its new four floors of the 30-storey site, but that could include as much as 30 per cent in rental incentives. The property is due for completion later this year.
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Keppel REIT reported first-quarter net property income of S$34.4 million (about $27 million), up 20.7% year-on-year. The rise equated to an annualised distribution per unit of S7.99¢, according to the report.
The increase was driven by higher occupancy at its 77 King Street office and the near-completion of two Singapore assets — Marina Bay Financial Centre and Ocean Financial Centre — which supported stronger property income for the quarter.
Keppel REIT expects a further boost next year when rents start flowing from QBE Insurance's new lease at 8 Chifley Square. Analysts estimate QBE will pay around $1,300 per square metre for four floors (possibly including up to 30% in rental incentives), which should increase rental income once occupancy begins.
Keppel REIT holds four premium Australian assets: the office tower at 77 King Street (direct ownership), a 50% interest in 8 Chifley Square (co-owned with Mirvac), a half-share in 275 George Street in Brisbane, and a 50% interest in the new office tower to be built on the site of the Old Treasury Building in Perth.
The REIT's directors said they will look to expand Keppel REIT's presence in Australia through acquiring premium-grade office assets, focusing on quality properties that can deliver stable occupancy and rental income.
According to Keppel REIT's directors, the Australian economy has shown stronger-than-expected employment growth and Sydney CBD demand has risen. Removal of some older office buildings for redevelopment has helped keep occupancy relatively stable, while prime office rental rates were reported to be holding firm at $811 per square metre per year.
The 8 Chifley Square property is due for completion later this year, and Keppel REIT expects rental income from QBE's new lease to begin the following year when the tenant takes occupancy.
Keep an eye on occupancy trends at 77 King Street and the other assets, the timetable and rent income from the QBE lease at 8 Chifley Square, any announced acquisitions of premium-grade Australian assets, and movements in Sydney CBD occupancy and prime office rental rates — all items highlighted in the report.
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