Keppel REIT's asset base doubled to over $6.6b

Since its first acquisition abroad in 2010.

Moody's Investors Service says that Keppel REIT's acquisition of a commercial property - 8 Exhibition Street - in Melbourne, Australia will further improve the quality of the trust's property portfolio.

At the same time, Moody's expects Keppel REIT to seek funding that will impact on its leverage in moderation.

Here's more from Moody's:

"The acquisition further improves Keppel REIT's geographic diversity and provides growth in its asset base, which has more than doubled to over SGD6.6 billion since the REIT's first overseas acquisition three years ago," says Jacintha Poh, a Moody's Analyst.

Keppel REIT announced that it would acquire the 50% interest in 8 Exhibition Street, Melbourne from United Super Investment (8 Exhibition Street) Pty Ltd for a consideration of AUD160.2 million (approximately SGD192 million).

The initial payment for the property is AUD8 million and the remaining portion will be funded through a combination of debt and equity.

"While we foresee the acquisition to possibly increase Keppel REIT's leverage, depending on the ultimate debt-equity mix, we expect it to maintain leverage no higher than 45% and, over time, closer to 40%. Keppel REIT's strong interest coverage of approximately 4.8x and proactive debt refinancing which minimizes refinancing risk for the next 12-18 months also provide some comfort," adds Poh.

8 Exhibition Street is a 35-storey freehold prime commercial building located in the central business district (CBD) of Melbourne. It has a total net lettable area of approximately 480,309 square feet with 3,304 square feet of ancillary retail space on the ground floor.

The building is fully leased to well-established tenants such as Ernst & Young, UBS, AECOM, National Australia Bank and Qantas. More importantly, it has a weighted average lease expiry of approximately five years and the leases have fixed annual rental escalations, which supports income stability.

This is the fifth property acquired by Keppel REIT in Australia over the past three years. The trust also has five Premium and Grade A office buildings in Singapore, sited in prime CBD locations .

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