Keppel REIT · SGX:K71U
Keppel REIT — K-REIT Asia — FY2008 Earnings Presentation
38 slides from Keppel REIT's earnings presentation, Jan 19, 2009
Slide 1: FY2008 Financial Results
FY2008 FINANCIAL RESULTS 19 Jan 2009 1
Slide 2: Contents
Contents Operations Review Portfolio Analysis Portfolio Valuation Capital Management Market Review & Outlook Going Forward 2
Slide 3: Highlights
Highlights Performance better than FY2007 and forecast FY2008 FY2008 distributable income 166.7% y-o-y Net property income 40.3% y-o-y Portfolio with 99% committed occupancy Average portfolio gross rental rate 26.4% y-o-y Low aggregate leverage of 27.6% No refinancing requirements until 2011 3
Slide 4: Operations Review
re Sla Operations Review
Slide 5: FY2008 DPU Outperformed Forecast by 18.3%
FY2008 DPU Outperformed Forecast by 18.3% FY 2008 FY2008 FY2007 ($'000) Actual Forecast(1) % Chg Actual % Chg Property Income 52,646 50,543 4.2 40,069 31.4 Net Property Income 39,659 35,949 10.3 28,262 40.3 Distributable Income 58,182 49,055 18.6 21,812 166.7 to Unitholders Distribution Per Unit (ce
Slide 6: 4Q 2008 DPU Outperformed Forecast by 32.2%
4Q 2008 DPU Outperformed Forecast by 32.2% 4Q 2008 4Q 2008 4Q 2007 ($'000) Actual Forecast(1) % Chg Actual % Chg Property Income 14,289 13,345 7.1 11,028 29.6 Net Property Income 11,813 8,573 37.8 7,024 68.2 Distributable Income 17,410 13,156 32.3 6,920 151.6 to Unitholders Distribution Per Unit (ce
Slide 7: Improved Performance Quarter-on-Quarter
Improved Performance Quarter-on-Quarter 4Q 2008 3Q 2008 ($'000) Actual Actual % Chg Property Income 14,289 13,862 3.1 Net Property Income 11,813 9,531 23.9 Distributable Income 17,410 15,191 14.6 to Unitholders Distribution Per Unit (cents) 2.67 2.34 14.1 Distribution Yield(1) (%) 15.2 13.3 14.4 (1)
Slide 8: Rising DPUs
Rising DPUs 12 11.36 11 10.09 10 8.82 8.91 DPU (cents) 9 8 7.53 7 6.76 6 5 Actual FY2006 Actual FY2007 Actual FY2008 Forecast(1) FY2008 FY2008 Forecast(1) Post-rights issue completed on 8 May 2008 DPU based on number of units as at end of period DPU based on weighted average number of units (1) Base
Slide 9: Healthy Balance Sheet
Healthy Balance Sheet Aggregate leverage of 27.6% • Lower than S-REIT weighted average of 32.6%(1) As at As at ($ million) 31 Dec 2008 31 Dec 2007 Non-current Assets 2,038.7 2,061.8 Total Assets 2,092.3 2,088.1 Borrowings 577.1 1,131.3 Total Liabilities 606.7 1,154.3 Unitholders' Funds 1,485.7 933.8
Slide 10: Awards and Accolades in 2008
Awards and Accolades in 2008 One Raffles Quay: • Winner of prestigious office category of the FIABCI Prix d‘Excellence Awards 2008 • Winner of Safety and Engineering Excellence Award by Building & Construction Authority, Singapore • Honorable Nominee for Best Tall Building Award by Council on Tall B
Slide 11: Portfolio Analysis
ee Sla Portfolio Analysis
Slide 12: Key Investor Concern
Key Investor Concern Risk of • Portfolio’s low average rent base • Rental support for 1/3 interest in One Raffles Quay declining • Long lease tenures for major financial tenants rents • Broad tenant diversity 12
Slide 13: Broad Tenant Diversity
Broad Tenant Diversity Tenant Business Sector by Net Lettable Area as at 31 Dec 2008 Shipping & Accounting & marine services consultancy services 7.5% 3.8% Services 9.1% Real estate & property services Banking, insurance & financial 8.3% services 118 tenants 35.6% Pharmaceuticals & healthcare in tot
Slide 14: Blue-chip Tenants
Blue-chip Tenants Portfolio’s Top 10 Tenants by Monthly Gross Rental Income for Dec 2008 Deutsche Bank 7.0% UBS AG 5.2% I.E.Singapore 5.1% ABN AMRO 4.6% Total 45.7% GE Pacific 4.5% of portfolio’s gross rental Intercontinental Hotels 4.3% income The Executive Centre 4.2% Prudential Tower Credit Suiss
Slide 15: Healthy Occupancy Rate
Healthy Occupancy Rate 99% portfolio committed occupancy as at 31 Dec 2008 higher than core CBD occupancy of 95.4% As at As at Assets 31 Dec 2008 31 Dec 2007 Prudential Tower 92.3% 100% Keppel Towers and GE Tower 99.2% 99.8% Bugis Junction Towers 100% 100% One Raffles Quay (1/3 stake) 100% 100% 15
Slide 16: Long Lease Terms
Long Lease Terms Weighted average lease term to expiry for • Portfolio: 5.6 years • Top 10 tenants who contribute 45.7% of portfolio’s rental income: 7.6 years 27% of NLA accounted by long lease terms(1) % of Portfolio’s Net Lettable Area (NLA) Accounted by Long Lease Terms Long lease terms, 27% Sho
Slide 17: Portfolio Lease Profile
Portfolio Lease Profile Lease Profile as a % of Net Lettable Area as at 31 Dec 2008 25% 19.9% 20% 15.4% 14.9% 15% 12.6% 11.3% 11.5% 9.5% 9.7% 10% 8.1% 6.4% 5% 0% 2009 2010 2011 2012 2013 Lease Expiry as a Percentage of Portfolio's Total NLA (Including 1/3 ORQ) Rent Review as a Percentage of Portfoli
Slide 18: Low Average Portfolio Rent than Market Rents
Low Average Portfolio Rent than Market Rents Average portfolio rent in Dec 2008: $7.61 psf pm Excluding ORQ, average portfolio rent is $6.08 psf pm Average Portfolio Gross Rental Rates (1) (1) (1) $7.43 $7.61 $7.37 (1) $6.86 (1) $6.02 $4.43 $4.28 $3.80 $4.05 psf per month Dec Mar Jun Sep Dec Mar Jun
Slide 19: Portfolio Valuation
ee Sla Portfolio Valuation
Slide 20: Key Investor Concern
Key Investor Concern Asset • Low aggregate leverage devaluation • Portfolio valuations within the lower end of risk leading market range to rise in • Aggregate leverage will exceed 60% only if capital value drops by more than 54% leverage 20
Slide 21: Portfolio Valuations vs Market Valuations
Portfolio Valuations vs Market Valuations K-REIT Asia’s asset valuations • Portfolio valuation of $2.1 billion unchanged from previous year Assets As at As at 31 Dec 2008 10 Dec 2007 Prudential Tower $ 2,066 psf $2,093 psf Keppel Towers and GE Tower $1,347 psf $1,347 psf Bugis Junction Towers $1,265
Slide 22: Sensitivity to Changes in Asset Values
Sensitivity to Changes in Asset Values Change in Value Current -10% -20% -30% -40% -50% -54% of K-REIT Asia’s Portfolio Aggregate 27.6% 30.7% 34.6% 39.5% 46.1% 55.3% 60.1% Leverage Average 1,707 1,536 1,365 1,195 1,024 853 785 Portfolio Valuation ($ psf) Aggregate leverage will exceed 60% limit only
Slide 23: Capital Management
ee Sla Capital Management
Slide 24: Key Investor Concern
Key Investor Concern • Rights issue completed in May 2008 Refinancing • No refinancing needs until 2011 risk • Low aggregate leverage • Medium-term note programme established 24
Slide 25: Improved Financial Position
Improved Financial Position Rights issue strengthened balance sheet • $551.7 million raised from issue of 396.9 million new units on 8 May 2008 As at 31 Dec 2008 As at 31 Dec 2007 Gross Borrowings $581.1m $1,132.1m Aggregate Leverage 27.6% 53.9% All-in Interest Rate 3.19% 3.88% Interest Coverage Rat
Slide 26: MTN Programme Established
MTN Programme Established $1 billion medium-term note (MTN) programme has been established as an additional source of funding Debt Profile as at 31 Dec 2008 Fixed-rate $190m Maturing in May 2011 mortgage loan Floating-rate Maturing in Mar 2011 $391m unsecured loan $ million 150 200 250 300 350 400 2
Slide 27: Market Review and Outlook
K-REITasSia Market Review and Outlook
Slide 28: Market Sentiment Weakens
Market Sentiment Weakens Global economic downturn • Singapore government expects GDP at between -2% and 1% in 2009 • Collective efforts by worldwide governments prevent downturn from worsening • Office demand likely to slow Singapore government acts to stabilise market • Suspension of confirmed land
Slide 29: Office Rents Expected to Moderate
Office Rents Expected to Moderate Prime office rent forecast for 2009: • $12 psf pm (source: Cushman & Wakefield) Office Market Occupancy and Rentals(1) 96.4% 96.8% 97.3% 97.1% 97.6% 97.6% 97.1% 96.2% 95.4% $20 100% $18 80% $16 $14 60% $12 18.65 18.80 18.80 17.15 40% $10 16.00 16.10 16.10 14.90 15.0
Slide 30: Singapore: Key Business Destination in Longer Term
Singapore: Key Business Destination in Longer Term Singapore: • Ranked as one of the top four places in the world to invest – KPMG’s survey of 260 leading global companies in Oct 2008 • Diversifying beyond a financial hub and establishing multi-hubs in various industry sectors • Recent corporate exp
Slide 31: Occupancy Costs in Singapore Remains Competitive
Occupancy Costs in Singapore Remains Competitive CBRE survey: • Singapore ranked below Hong Kong (Central CBD), Tokyo and Mumbai CBRE’s Global 50 Index for Office Occupancy Costs, Nov 2008 Rank Market US$/sq ft per year 1 London (West End), England 248.66 2 Moscow, Russia 234.73 3 Hong Kong (Central
Slide 32: Going Forward
ee Sla Going Forward
Slide 33: Going Forward
Going Forward Challenging year ahead Mitigating factors for K-REIT Asia • Low aggregate leverage with no refinancing needs until 2011 • Room for positive rental reversions despite weak market sentiment • Proactive asset management • Strong sponsor support Economic downturn presents opportunities for
Slide 34: Thank You
Thank You The value of units in K-REIT Asia (“Units”) and the income from them may fall as well as rise. Units are not obligations of, deposits in, or guaranteed by, the Manager or any of its affiliates. An investment in Units is subject to investment risks, including the possible loss of the princi
Slide 35: Additional Information
ee Sla Additional Information
Slide 36: Distribution Details
Distribution Details Distribution to Unitholders Distribution Period 1 Jul 2008 - 31 Dec 2008 Distribution Rate 5.07 cents per unit - Taxable: 3.91 cents per unit - Tax-exempt: 1.16 cents per unit Timetable Notice of Books Closure Date 29 Jan 2009 Last Day of Trading on "cum" Basis 22 Jan 2009, 5.00
Slide 37: Snapshot of K-REIT Asia
Snapshot of K-REIT Asia Manager K-REIT Asia Management Limited Property Portfolio 5 commercial office assets valued at $2.1 billion Listing Date 28 Apr 2006 on Singapore Stock Exchange Market Capitalisation $437 million as at 16 Jan 2009 Unit Price $0.67 Number of Units in Issue 652,724,165 Free Flo
Slide 38: Asset Portfolio
Asset Portfolio Property within/ Keppel Towers and Bugis Junction Prudential Tower(1) One Raffles Quay near Singapore CBD GE Tower Towers Net Lettable Area 10,074 40,002 22,991 41,360(2) (sm) Number of Tenants 11 66 9 32 GE Pacific IE Singapore McGraw-Hill Companies Deutsche Bank Seadrill Management