Keppel : Unaudited Results of Keppel REIT for the Fourth Quarter and Full Year Ended 31 December 2015

8b09b7ca-bac8-4d25-9e87-eaa858e0b64e.pdf

MEDIA RELEASE

Unaudited Results of Keppel REIT for the Fourth Quarter and Full Year Ended 31 December 2015

18 January 2016

The Directors of Keppel REIT Management Limited, as Manager of Keppel REIT, are pleased to announce the unaudited results of Keppel REIT for the fourth quarter and full year ended 31 December 2015.

The materials are also available at www.keppelreit.com, www.keppelland.com and www.kepcorp.com.

For more information, please contact:

Media Relations	Investor Relations
Ms Eileen Tan	Ms Grace Chia
Senior Executive	Senior Manager
Group Corporate Communications	Investor Relations & Research
Keppel Corporation Limited	Keppel REIT Management Limited
Tel: [phone]	Tel: [phone]
Email: [e-mail]	Email: [e-mail]

Keppel REIT's 4Q 2015 distributable income grew 17.8% y-o-y Gearing reduced significantly to 39.3% and High portfolio occupancy of 99.3% as at end-2015

Key Financial Highlights

• Income distributed to Unitholders for the fourth quarter of 2015 ("4Q 2015") and full year 2015 (FY 2015) rose 17.8% and 5.4% year-on-year ("y-o-y"), and remained constant on a quarter-on-quarter ("q-o-q") basis

• Higher distributable income was achieved despite the lack of income from Prudential Tower, as well as the absence of rental support from Ocean Financial Centre and Marina Bay Financial Centre ("MBFC") Phase One

• Improvement in distributable income was due mainly to higher property income from all assets in Singapore and Australia, as well as higher contributions from share of results of associates and share of results of joint ventures

• Distribution per unit ("DPU") of 1.68 cents for 4Q 2015, amounting to a total of 6.80 cents for FY 2015

  
  

  Key Capital Management Highlights

• Gearing level reduced significantly by approximately 8% to 39.3%, considerably lower than the Monetary Authority of Singapore's (MAS) revised gearing limit of 45%

• Maintained fixed-rate loans at 70% which safeguards against interest rate volatility and provides certainty of interest expenses as well as financial and operational flexibility

• Average cost of debt remained stable at 2.5% and interest coverage ratio at a healthy 4.4 times

• Completed almost 100% of refinancing requirements in 2016, and maintained well-staggered debt maturity profile with weighted average term to expiry at a healthy 3.7 years

• Almost 100% of income from Australia hedged up till the third quarter of 2016 ("3Q 2016")

  
  

  Key Portfolio Highlights

• Concluded a total of 114 leases, equivalent to approximately 1.6 million sf (attributable space of approximately 800,000 sf) of prime office space in 2015, bringing overall portfolio occupancy to a high of 99.3%

• Of the total new leases signed during the year, half were from tenants who were new to Keppel REIT's portfolio, one quarter from tenants new to Singapore and the remaining one quarter were expansions by existing tenants

  
  

  Key Portfolio Highlights (continued)

  • Approximately 30% (32 leases) or 480,000 sf (attributable space of approximately 222,000 sf) of space was committed in 4Q 2015

  • Tenants from the telecommunications, media and technology ("TMT") sector accounted for half of the new leases signed during the quarter

  • Achieved high tenant retention rate of 90% as at end-2015, and positive rent reversion averaging 13% for all new and renewed office leases in Singapore

  • For leases expiring in 2016, the Manager is already in advanced negotiations with these tenants and is likely to achieve high retention

  • For leases expiring in 2017, the Manager is also proactively engaging these tenants and is likely to renew most of these leases as the majority of these tenants are in their first renewal cycle

  • Approximately 75% of total leases not due for renewal till 2018 and beyond, when limited new office supply is expected

  • The Government of Western Australia (WA) commenced its 25-year lease at the office tower on the Old Treasury Building site in Perth in November 2015

  • Announced divestment of interest in 77 King Street in Sydney for A$160 million or S$160 million, which is approximately 40% and 27% above the original purchase price and latest valuation respectively

Summary of Results

GROUP
4Q2015	4Q2014	FY2015	FY2014
$'000	$'000	$'000	$'000
Property income	42,795	42,337	170,347	184,093
Net property income	34,771	34,253	137,465	151,436
Share of results of associates	16,862	16,115	75,695	60,745
Share of results of joint ventures	5,157	4,128	17,163	9,848
Income available for distribution	54,031	45,848	217,268	206,142
Distribution to Unitholders1	54,031	45,848	217,268	206,142
Distribution per Unit ("DPU") (cents) for the period/year	1.68	1.51	6.80 2	7.23
Distribution Yield %	7.3% 3	5.9% 4

Notes:

1. Distribution to Unitholders was based on 100% of the taxable income available for distribution.

2. Based on 1.70 cents, 1.72 cents, 1.70 cents and 1.68 cents reported in 1Q 2015, 2Q 2015, 3Q 2015 and 4Q 2015 respectively.

3. Based on the market closing price per unit of $0.93 as at the last trading day, 31 December 2015.

4. Based on the market closing price per unit of $1.22 as at the last trading day, 31 December 2014.

Delivering Sustained Returns

Keppel REIT Management Limited, the Manager of Keppel REIT, is pleased to deliver higher y-o-y distributable income of $54.0 million for 4Q 2015 and $217.3 million for FY 2015. The income distributed to Unitholders is 17.8% and 5.4% above the corresponding periods in 2014 respectively, and constant on a q-o-q basis.

The Manager achieved higher distributable income despite the lack of income from Prudential Tower, which was divested in September 2014, as well as the absence of rental support from Ocean Financial Centre1 and MBFC Phase One from January 2015 and 1Q 2014 respectively.

The y-o-y improvement to distributable income was due mainly to higher property income from all assets in Singapore and Australia, as well as higher contributions from share of results of associates and share of results of joint ventures. The increases in share of results of associates and joint ventures were due mainly to the full-year income contribution from Keppel REIT's one-third stake in MBFC Tower 3 and higher contributions from 8 Chifley Square in Sydney as well as the office tower on the Old Treasury Building site in Perth respectively.

The Manager is declaring a DPU of 1.68 cents for 4Q 2015. This amounts to a total of 6.80 cents for FY 2015, which translates to a distribution yield of 7.3%.

On 17 January 2016, the Manager announced the divestment of its interest in 77 King Street in Sydney for A$160 million or approximately S$160 million2. The sale price is approximately 40% above Keppel REIT's original purchase price of A$116 million in end-2010 and an approximate 27% premium over its latest valuation. The divestment, which is expected to be completed in 1Q 2016 is in line with the Manager's aim to maximise and capture value for Unitholders, while providing Keppel REIT with greater financial flexibility.

Keppel REIT's properties in Singapore and Australia were assessed by independent valuers to be $8.4 billion as at end-2015 due to better performance and stronger rental income from the properties. This resulted in a net fair value gain of $218 million for FY 2015. The average cap rates for the Singapore and Australian properties were approximately 3.75% and 6.15% respectively.

Robust Capital Structure

In managing market volatilities, the Manager continued to proactively manage its financing, interest and foreign currency exposure risks.

During the quarter, Keppel REIT's gearing level reduced significantly by approximately 8% to 39.3%, considerably lower than MAS' revised gearing limit of 45%3. The improvement was due mainly to lower borrowings and revaluation gains from Keppel REIT's investment properties in end-2015.

As at end-2015, the Manager maintained its fixed-rate loans at 70%, which safeguards the REIT against interest rate volatility and provides certainty of interest expenses as well as financial and operational flexibility. This saw Keppel REIT's average cost of debt remaining stable at 2.5% and interest coverage ratio at a healthy 4.4 times.

Keppel REIT continued to maintain a well-staggered debt maturity profile, with its weighted average term to expiry at a healthy 3.7 years. As at end-2015, almost 100% of the REIT's refinancing requirements in 2016 have been completed.

1 Refers to Keppel REIT's 87.5% interest in Ocean Financial Centre 2 Based on the exchange rate of A$1=S$1 as at 14 January 2016. 3 W.e.f 1 January 2016.