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Keppel-KBS US REIT IPO – A High Dividend REIT For Diversification

Watch Out For Keppel-KBS US REIT IPO

Keppel-KBS US Reit has attracted my attention with its estimated 2018 distribution yield at 6.8 per cent and an expected distribution yield of 5.8 per cent for 2019. This will amount to a total return of a whopping 12.6 per cent yield for a good start.

The intended IPO price is set to be US$0.88 to raise gross proceeds of US$553.1 million. Its IPO portfolio spans a net lettable area of 3.2 million sq ft across Seattle, Sacramento, Denver, Austin, Houston, Atlanta and Orlando. Close to 70 per cent is Class A. So, for those investors who are keen to diversify their stock portfolio globally, this may be a choice for considerations. The Keppel-KBS US REIT aims to provide Unitholders with attractive total returns driven by regular and stable distributions.

Summary of Keppel-KBS US REIT IPO

Based on the reported news, here is the list of potential risks and advantages of this new Keppel-KBS US REIT

Potential Risks

  • USD-SGD currency exchange risk
  • No right of first refusal for these assets for Keppel-KBS US Reit due to US rules preventing any class of investors being unfairly favoured.
  • Any US – North Korea tension or war can cause short to medium term impact.

Advantages

  • Keppel Branding
  • No need broker and hence lower transaction cost
  • Better access to information
  • Potential growth over next two to three years with another round of freehold properties acquisition from KBS Strategic Opportunity Reit  worth US$300-320million

Portfolio Stability

  • The Keppel-KBS US REIT IPO Portfolio has a well-diversified base of 340 tenantsin growth and defensive sectors such as technology, financial and insurance, professional services, as well as medical and healthcare.
  • This portfolio also enjoys a high committed occupancy rate of 90.0% and a stable lease expiry profile of 3.7 years, with no single year having over 20% of total leases expiring, thereby ensuring stability of cash flows.

Distribution Policy

  • 100% of its Annual Distributable Income for the period from the Listing Date to the end of Projection Year 2019.
  • At least 90% of its Annual Distributable Income on a semi-annual basis thereafter.

 

Conclusion

My intention is to wait and see for this IPO to be listed on 9 Nov 2pm on SGX first and to acquire some of its shares in the next six months or so. Hence, i gave a miss for this IPO first.  If you are keen to diversify your portfolio into US market, do your own due diligence before investing on it.

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