Keppel-KBS US REIT – Caught in a Perfect Storm. Buying Opportunity Amidst Share Price Plunge.

Keppel-KBS US REIT IPO: Looks Cheap but Asset Mix Matters

Keppel-KBS US REIT: More of the Same in a Peaking Phase?

Singapore and emerging market real estate

Royston Foo

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/192" target="_blank" data-smartkarma-citation="entities:192:1">Keppel Reit (KREIT SP)</a> announced on 30th November that it had entered into a sale and purchase agreement to divest 20% interest in Ocean Properties LLP, the SPV that holds Ocean Financial Centre (“OFC”). The buyer of the 20% interest in OFC is Allianz Real Estate and the agreed property value for the 20% interest in OFC is S$537.3 mil, translating to a rate of S$3,061 psf on NLA.Divestment of OFC stake is positive to unitholders on many fronts:1) Monetising OFC at an attractive price but yet maintaining a significant ownership in the price asset2) Lower gearing helps to position Keppel REIT for new acquisition and reduces probability of EFR3) Divestment lowers DPU for now but capital recycling and unit buyback should drive DPU higher in future4) Transaction price helps validate current valuation Investors looking for quality and stable income and quality management should keep Keppel REIT under their radar. As Keppel REIT recycle capital and replace lower yielding assets with higher yielding ones, income and distributions to unitholders will also improve over time. Investors should wait for opportunity to enter at a more attractive price level of S$1.00 to S$1.05 per unit (above 5% entry yield) and position to participate in the upcoming growth acquisition phase of Keppel REIT.

Keppel Reit (KREIT SP) announced on 30th November that it had entered into a sale and purchase agreement to divest 20% interest in Ocean Properties LLP, the SPV that holds Ocean Financial Centre (“OFC”). The buyer of the 20% interest in OFC is Allianz Real Estate and the agreed property value for the 20% interest in OFC is S$537.3 mil, translating to a rate of S$3,061 psf on NLA.Divestment of OFC stake is positive to unitholders on many fronts:1) Monetising OFC at an attractive price but yet maintaining a significant ownership in the price asset2) Lower gearing helps to position Keppel REIT for new acquisition and reduces probability of EFR3) Divestment lowers DPU for now but capital recycling and unit buyback should drive DPU higher in future4) Transaction price helps validate current valuation Investors looking for quality and stable income and quality management should keep Keppel REIT under their radar. As Keppel REIT recycle capital and replace lower yielding assets with higher yielding ones, income and distributions to unitholders will also improve over time. Investors should wait for opportunity to enter at a more attractive price level of S$1.00 to S$1.05 per unit (above 5% entry yield) and position to participate in the upcoming growth acquisition phase of Keppel REIT. 

Keppel REIT – Divestment of 20% Interest in Ocean Financial Centre Positive for Unitholders