SINGAPORE (July 20): The manager of Keppel REIT has declared a distribution per unit (DPU) of 1.40 cents for the 2Q20 ended June, 0.7% higher than the DPU of 1.39 cents declared in 2Q19.

This brings 1H20 DPU to 2.80 cents, 0.7% higher than 1H19’s 2.78 cents.

Distributable income for the quarter climbed 0.4% y-o-y to $47.5 million. Distributable income for 1H20 inched up 0.2% y-o-y to $94.8 million. The figures include capital gains distribution of $5.0 million and $10.0 million for 2Q20 and 1H20 respectively, compared to the gains of $3.0 million and $6.0 million a year ago.

Keppel REIT noted that the stable distributable income was mainly attributable to the contributions from T Tower in Seoul, South Korea, which was acquired in May 2019. The commencement of major leases in its Singapore portfolio, as well as higher capital gains distribution and lower borrowing costs also contributed to the numbers.

The figures were offset by the implementation of Covid-19 tenant relief measures, as well as the cessation of rental support and lower income contribution following the divestment of Bugis Junction Towers in November 2019.

Property income for 2Q20 fell 7.9% to $36.8 million from last year’s $40.0 million mainly due to the rental waivers given to eligible tenants, lower property income from Ocean Financial Centre, 275 George Street, 8 Exhibition Street, as well as absence of income from Bugis Junction Towers.

This was partially mitigated by contributions from T Tower.

Consequently, 2Q20 net property income (NPI) fell 7.2% y-o-y to $28.8 million.

Likewise, property income for 1H20 fell 5.6% y-o-y to $75.5 million due to lower one-off income, rental waivers, and lower contributions.

NPI for 1H20 came in 5.4% lower y-o-y at $59.0 million.

The manager of the REIT says it has a portfolio occupancy rate of 98.6% and a weighted average lease expiry (WALE) of 4.6 years as at June 30. It added that the REIT’s prime office portfolio and high-quality tenant profile have provided income stability and resilience during the “challenging” Covid-19 period. 

For 1H20, Keppel REIT had a tenant retention rate of 71%, as well as a total of 623,200 sf in committed total leases

“However, with increased government measures and the extended outbreak, the Manager has increased targeted tenant support measures over this last quarter,” it says.

In line with the COVID‐19 (Temporary Measures) (Amendment) Bill, eligible SME retail tenants in Singapore will receive a minimum of four months of rental support from the government and the landlords, while office SME tenants that qualify will receive two months of rental support co‐shared by the government and the landlords.

Based on the initial eligibility criteria, some 4.2% of Keppel REIT’s tenants will qualify for this mandatory relief in Singapore.

In Australia, partial rent waivers and deferrals will be granted to qualifying SME tenants, which comprise some 1.4% of Keppel REIT’s portfolio.

The tenant support measures, which include the pass-through of property tax rebates and cash grants from the Singapore government, are estimated to cost Keppel REIT some $12.5 million as at June 30.

As at June 30, cash and cash equivalents stood at $88.1 million.

Earnings per unit (EPU) for the quarter came it at 1.12 cents, and 1.77 cents for 1H20. Net asset value (NAV) stood at $1.34 as at June 30.

Looking ahead, Keppel REIT’s manager also believes that physical offices will remain necessary despite the wide adoption of telecommuting during the outbreak.

“The Manager will continue to optimise the portfolio and calibrate Keppel REIT’s leasing strategy to meet potential shifts in occupier demand,” it says.

Units in Keppel REIT closed 1 cent higher, or 0.9% up, at $1.09 on Monday, prior to the announcement.