KEPPEL DC Reit posted a 13.7 per cent lower first-quarter distribution per unit (DPU) of S$0.02192, compared with S$0.02541 in the year-ago period.
Gross revenue was up 18.4 per cent to S$83.4 million for the quarter, from S$70.4 million in Q1 FY2023.
This was mainly due to a settlement sum received in relation to a dispute with DXC Technology Services, and positive reversions and escalations, said the manager on Friday (Apr 19).
The manager noted that the S$13.3 million settlement sum from DXC has been received in full. After the deduction of related expenses and taxes, distributable income of about S$11.2 million will be distributed equally over four quarters in FY2024.
The Q1 rental income from Guangdong data centres (GDCs) continues to be recognised under gross revenue, correspondingly net off via loss allowance in property expenses, said the manager.
Property expenses for the period, as a result, rose 89.6 per cent to S$12.4 million from S$6.5 million the year before.
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DPU for Q1 was reduced by S$0.00326 due to the GDCs’ leases. The quarter’s DPU would be S$0.02518, down 0.9 per cent from the previous year, if not for the impact of rental arrears.
In the second half of FY2023, the real estate investment trust (Reit) reported a S$10.5 million loss allowance to account for the rental owed by the tenant of GDC 1, 2 and 3 – Guangdong Bluesea Data Development. The loss allowance affected FY2023 DPU by S$0.00649.
For Q1 FY2024, net property income grew 11.2 per cent on the year to S$71 million for the quarter, from S$63.9 million.
Distributable income for the period declined 16.3 per cent year on year to S$38.8 million, from S$46.3 million.
“Distributable income and DPU were also impacted by higher finance costs and less favourable foreign exchange hedges in 2024,” said the manager.
Finance costs for Q1 was up 23.7 per cent on the year to S$13 million from S$10.5 million.
As at Mar 31, 2024, the Reit’s aggregate leverage stood at 37.6 per cent, up 20 basis points from Dec 31, 2023. Interest coverage ratio for the trailing 12 months stood at 4.6 times, from 0.1 times as at end-2023.
Portfolio occupancy stood at 98.3 per cent as at the end of March. Portfolio weighted average lease expiry (Wale) was 7.4 years by lettable area. Wale by rental income was 4.3 years, as a higher proportion of rental income was from co-location assets, which typically have shorter contractual periods, the manager noted.
Keppel DC Reit acquired its first data centre in China from Guangdong Bluesea Data Development – a unit of Neo Telemedia – for 635.9 million yuan (S$119.8 million) in July 2021. Around a year later, the Reit acquired two more data centre facilities from Bluesea for 1.6 billion yuan.
Neo Telemedia, the GDCs’ master tenant, has been in financial distress. In its 2022 annual report, its independent auditors said there was material uncertainty that may cast significant doubt on the group’s ability to continue as a going concern. It reported a net loss of HK$179.6 million (S$30.8 million) for the first nine months of FY2023, compared to the HK$23 million net profit of the year before.
On Jan 26, chief executive of the manager Loh Hwee Long said that the Reit is taking a “collaborative but firm” approach, which is preferable to litigation, to resolve the rental arrears issue. He also noted that the Reit retains the rights to terminate the master leases, and its sponsor Keppel has the resources to take over the operations if appropriate.
Last December, the Reit issued a letter of demand to the tenant to recover 48.3 million yuan in arrears to date, as well as a request for a top-up of security deposits of 32.2 million yuan.
Units of Keppel DC Reit : AJBU 0% closed flat on Thursday at S$1.66.
