Keppel REIT · SGX:K71U
Keppel REIT — Citi APAC Property Conference 2019
43 slides from Keppel REIT's conference presentation, Jun 27, 2019
Slide 1: Investor Presentation – Citi APAC Property Conference
Investor Presentation Citi APAC Property Conference Hong Kong 27 June 2019
Slide 2: Outline
Outline • Key Highlights 3 • Portfolio Optimisation 4 • Market Review 15 • Acquisition in Seoul 19 • Additional Information 34 IMPORTANT NOTICE: The past performance of Keppel REIT is not necessarily indicative of its future performance. Certain statements made in this presentation may not be based
Slide 3: Key Highlights
Key Highlights • Delivered distributable income (DI) of 1Q 2019 Portfolio Statistics (1) $47.3 million and distribution per Unit (DPU) of 1.39 cents in 1Q 2019 High Committed Occupancy • Lowered aggregate leverage to 35.7% and extended weighted average term to maturity to 98.7% 3.3 years(2) as at 31
Slide 4: Portfolio Optimisation
Portfolio Optimisation Marina Bay Financial Centre, Singapore
Slide 5: 1Q 2019 Leasing Updates
1Q 2019 Leasing Updates Leases Committed by Geography(3) ~136,400 sf 0 100% (Attributable ~57,100 sf) Leases Committed Singapore Australia 69% Leases Committed by Type(3) Retention Rate Average signing rent for Singapore office leases (1) 49.9% 50.1% ~$12.03 psf 98.7% above Grade A core CBD market a
Slide 6: 1Q 2019 Leasing Updates (Cont’d)
1Q 2019 Leasing Updates (Cont’d) ▪ New leasing demand and expansions mainly contributed by: 1) Technology, media and telecommunications sector 2) Banking and financial services sector 3) Energy sector New leases committed (in 1Q 2019) 44.1% 32.6% 22.3% 0.9% 0.1% Technology, media and Banking, insura
Slide 7: Proactive Leasing Strategy
Proactive Leasing Strategy ▪ Committed occupancies remain healthy and above market average High Portfolio Committed Occupancy (as at 31 Mar 2019) Singapore Australia Overall 98.5% 99.4% 98.7% 98.6% 99.2% 96.1% 100.0% 99.3% 99.0% 100.0% 100.0% 98.7% Singapore’s core CBD Australia’s national CBD (1) a
Slide 8: Diversified Tenant Base
Diversified Tenant Base Top 10 Tenants Profile of Tenant Base 40.0% of NLA 36.6% of gross rent 338(1) tenants in total DBS 6.6% Government of Western 5.3% Australia Australia Banking, insurance and financial services 41.2% Standard Chartered 4.5% Government agency 11.4% Ernst & Young 4.1% Technology
Slide 9: Well-Spread Lease Expiry Profile
Well-Spread Lease Expiry Profile Based on committed attributable NLA ▪ Long overall portfolio WALE of 5.7 years (Singapore portfolio: 4.5 years, Australia portfolio: 9.6 years) ▪ Top 10 tenants’ WALE was 8.0 years 45.2% Expiring leases Rent review leases 16.8% 19.4% 8.1% 7.6% 7.7% 6.5% 4.4% 2.7% 0.4
Slide 10: Unlocking Capital Gains
Unlocking Capital Gains ▪ Divested 20% stake in Ocean Financial Centre to Allianz ▪ Keppel REIT maintains controlling stake of 79.9% ▪ Unlocking capital gains while maintaining exposure to strengthening Singapore Grade A office market 20% of Ocean Financial Centre Sale Price(1) $537.3 m Purchase Pri
Slide 11: Unit Buy-Back Programme
Unit Buy-Back Programme Monthly Unit Buy-Back Volume (since initiation of programme until 1Q 2019) ▪ Buying back Units below NAV is accretive to Unitholders and is part of proactive capital 13.56m management strategy ▪ Purchased and cancelled 34.0 million issued Units since the initiation of Unit bu
Slide 12: Proactive Capital Management
Proactive Capital Management ▪ Refinancing remaining loans due in 2019 with commitments received as at 31 March 2019 Managing interest rate exposure (as at 31 March 2019) ▪ Extended weighted average term to maturity from 2.8 years(1) to 3.3 years(2) in 1Q 2019 9% ▪ Lowered aggregate leverage from 36
Slide 13: Convertible Bonds
Convertible Bonds ▪ Issued 5-year convertible bonds on Debt Maturity Profile 10 April 2019 at coupon rate of 1.9% to lower (as at 31 Mar 2019, assuming convertible bonds were issued in 1Q 2019) interest costs and diversify funding sources ▪ Financing option that brings estimated interest 31% savings
Slide 14: Spencer Street Development
311 Spencer Street Development Development: 311 Spencer Street, Melbourne ▪ Construction of freehold Grade A office tower is ongoing in Melbourne ▪ Commencement of 30-year lease to the Victoria Police expected in 1H 2020 Development continues to Artist’s Impression progress 14
Slide 15: Market Review
Market Review 8 Chifley Square, Sydney
Slide 16: Singapore Office Market
Singapore Office Market ▪ Continued growth in the Singapore office sector, with average Grade A office rents increasing to $11.15 psf as average occupancy in core CBD rose to 95.2% 95.2% 95.1% 95.9% 95.8% 95.6% 94.1% 92.5% 93.8% 94.1% 94.1% 94.6% 94.8% 95.2% 100% $14 $12 80% $10.45 $10.80 $11.15 $10
Slide 17: Singapore Office Market (Cont’d)
Singapore Office Market (Cont’d) ▪ Office market outlook remains positive, supported by limited supply which could further tighten in the medium term if older buildings are redeveloped in view of URA’s CBD incentive scheme Office Demand and Supply Key Upcoming Supply in CBD(2) sf Past average annual
Slide 18: Australia Office Market
Australia Office Market ▪ Healthy leasing activity and strong net absorption reported ▪ National CBD office market occupancy continued its upward trend from 90.9% as at end September 2018 to 91.4% as at end December 2018 ▪ Vacancy rates expected to remain low Brisbane CBD - Occupancy rose to 86.8% -
Slide 19: Acquisition in Seoul
Acquisition in Seoul T Tower in Seoul’s CBD
Slide 20: Transaction Overview
Transaction Overview ▪ Acquired 99.38%(1) of T Tower, a freehold Grade A office building in Seoul’s central business district (CBD) ▪ Entry into Seoul which has a deep office market with favourable fundamentals ▪ Ability to leverage Keppel Capital’s on-the-ground presence and experience to seek oppo
Slide 21: Transaction Overview (Cont’d)
Transaction Overview (Cont’d) ▪ DPU-accretive acquisition with NPI yield of 4.7% 99.38% of T Tower KRW $ is part of ongoing portfolio optimisation efforts to improve portfolio yield Independent Valuation by 259.0b 309.0m Cushman & Wakefield(1) ▪ Agreed property value of KRW 252.6 billion(1,3) (appro
Slide 22: Investment Rationale
Investment Rationale Entry into Seoul which has a deep office market with 1 favourable fundamentals 2 Freehold Grade A commercial building in the CBD 3 DPU-accretive acquisition 4 Geographical and income diversification Leverage Keppel Capital’s on-the-ground presence 5 and experience in South Korea
Slide 23: Seoul Office Market
Seoul Office Market T Tower: Located in CBD
Slide 24: Seoul: Deep Office Market
Seoul: Deep Office Market Economy South Korea Office Transactions(4) (by Buyer Type) ▪ South Korea is Asia’s fourth largest economy(1) KRW Trillion 14.0 ▪ The Korean economy is projected to expand by 2.5% in 2019 and 2.6% in 2020(2) 12.0 10.0 ▪ Korean won (KRW) to Singapore dollar ($) has been tradi
Slide 25: Seoul Office Market: Favourable Fundamentals
Seoul Office Market: 3 Key Business Districts in Seoul(1) Favourable Fundamentals Central Business District (CBD): The traditional CBD, a well-established market ▪ Grade A office buildings will continue to be in high demand across the three business districts(2) Gangnam Business District (GBD): Fast
Slide 26: Seoul CBD: Limited Upcoming Supply
Seoul CBD: Limited Upcoming Supply ▪ Vacancy rate will peak in 2020 at 16% before lowering to 13% in 2022 with the limited supply for the subsequent years(1) CBD Supply and Vacancy(1) CBD Effective Rent(1) sqm % KRW per py 300,000 18.0% 90,000 16.0% 85,000 250,000 14.0% 80,000 200,000 12.0% 75,000 1
Slide 27: Property Highlights
Property Highlights T Tower: High Accessibility
Slide 28: Freehold Grade A Property
Freehold Grade A Property ▪ Located in the CBD, Seoul’s well-established business district ▪ Close to Seoul Station and well-served by various rail, subway and bus networks, including direct connections across the Seoul metropolitan area and regionally via high speed KTX train ▪ Strong connectivity
Slide 29: Fully Leased to Established Tenant Base
Fully Leased to Established Tenant Base Tenant Mix (% of NLA) ▪ 100% leased to established national and 5.8% international tenants mainly from the technology, 11.6% media and telecommunications (TMT), 33.2% manufacturing and distribution, and services sectors ▪ Notable tenants include: 19.8% ▪ Phili
Slide 30: DPU-Accretive Acquisition
DPU-Accretive Acquisition ▪ Acquisition of T Tower brings 2.5%(1) DPU accretion on a pro forma basis for FY 2018 ▪ Acquisition funded by debt, including proceeds from issuance of 1.90% convertible bonds ▪ Investment approximately 50% natural hedged with a KRW denominated loan ▪ Aggregate leverage in
Slide 31: Complements Existing Portfolio
Complements Existing Portfolio ▪ Freehold portion of portfolio increases from 14.9% to 20.6% ▪ Portfolio committed occupancy level rises from 98.7% to 98.8% ▪ Portfolio WALE remains long at approximately 5.5 years while lease expiry remains well spread Portfolio Lease Expiry Profile (by committed at
Slide 32: Leverage Keppel Capital’s Expertise in South Korea
Leverage Keppel Capital’s ▪ Keppel Capital has been operating in South Korea since 2004 and has managed various commercial assets in Seoul Expertise in South Korea 15 years of operations $3 billion of AUM managed Jongno Tower Seoul Square Center Place ▪ Keppel Investment Management, the asset manage
Slide 33: Pan-Asian REIT with Premium Office Portfolio
Pan-Asian REIT with Premium Office Portfolio $8.4b portfolio of 10 prime commercial assets in key business districts of Singapore, Australia and South Korea T Tower, Seoul 311 Spencer Street, 99.38% Interest Melbourne (Acquired on 27 May 2019) Ocean Financial South Korea Centre 50% Interest (Under d
Slide 34: Additional Information
Additional Information David Malcolm Justice Centre, Perth
Slide 35: Financial Performance
Financial Performance 1Q 2019 1Q 2018 +/(-) Property Income $40.0 m(1) $39.7 m +0.7% Net Property Income (NPI) $31.3 m $31.2 m +0.3% Less: Attributable to Non-controlling Interests ($4.1 m) -* NPI Attributable to Unitholders $27.2 m(2) $31.2 m (12.6%) Share of Results of Associates $26.4 m(3) $28.5
Slide 36: Income Contribution
Income Contribution Breakdown by Geography (for 1Q 2019) 1Q 2019 % 1Q 2018 % Ocean Financial Centre(1) 16,129 26.0 21,479 32.6 79.9% Marina Bay Financial Centre 22,266 35.9 21,074 32.0 One Raffles Quay 6,173 9.9 6,928 10.5 Bugis Junction Towers 4,997 8.1 3,735 5.7 8 Chifley Square 3,084 5.0 3,233 4.
Slide 37: Balance Sheet
Balance Sheet As at 31 Mar 2019 As at 31 Dec 2018 +/(-) Total Assets $7,616 m $7,784 m (2.2%) Borrowings(1) $2,930 m $3,044 m (3.7%) Total Liabilities $2,321 m $2,449 m (5.2%) Unitholders’ Funds $4,714 m $4,757 m (0.9%) Adjusted NAV per Unit(2) $1.37 $1.39 (1.4%) (1) Included borrowings accounted fo
Slide 38: Young and Green Commercial Assets
Young and Green Commercial Assets Large Portfolio of Strong Portfolio Commitment to Premium Office Assets Occupancy and WALE Sustainability High portfolio committed BCA Green Mark Platinum Over $8 billion of occupancy and long WALE award for all Singapore assets; Grade A commercial assets provides i
Slide 39: Milestones since Listing
Milestones since Listing Acquired Acquired 50% of Expanded Listed on footprint to Increased Acquired 87.5% of David Malcolm Justice Acquired 50% of SGX South Korea Stake in 50% of Ocean Centre, Perth, and Acquired three 311 Spencer Street with over Prudential 8 Chifley Financial 8 Exhibition Street,
Slide 40: Portfolio Information: Singapore
Portfolio Information: Singapore Marina Bay As at 31 Mar 2019 Ocean Financial Centre One Raffles Quay Bugis Junction Towers Financial Centre(4) Attributable NLA 699,868 sf 1,024,611 sf 442,576 sf 248,853 sf Ownership 79.9% 33.3% 33.3% 100.0% BNP Paribas, DBS Bank, Deutsche Bank, Enterprise Singapore
Slide 41: Portfolio Information: Australia
Portfolio Information: Australia 311 Spencer Street, 8 Chifley Square, 8 Exhibition Street, 275 George Street, David Malcolm As at 31 Mar 2019 Melbourne Sydney Melbourne(3) Brisbane Justice Centre, Perth (Under construction) Attributable NLA 104,070 sf 244,491 sf 224,693 sf 167,784 sf 358,683 sf Own
Slide 42: Keppel REIT Structure
Keppel REIT Structure Keppel Capital Keppel Land Institutional and The REIT Manager can leverage The REIT Manager can leverage Public Investors the Sponsor‘s expertise and the scale and resources of a larger 52.3% asset management platform 4.4% track record in this industry 43.3% 100% Management Act
Slide 43: Thank You
Thank You COU REIT “3g