Banking tenant terminates lease in Ocean Financial Centre

The tenant paid a one-off pre termination fee amounting to $12m.

Another tenant in Keppel REIT’s Ocean Financial Centre is terminating its lease, Maybank Kim Eng has found. In a research note, analyst Derrick Heng said the REIT booked another large one-off pre-termination income worth $12m in the second quarter of 2018, pushing overall income beyond the brokerage’s expectations.

“Citing tenant confidentiality, management declined to provide specific details, except that its original leases were due to expire in 2020,” Heng said.

However, with a significant increase in income from Ocean Financial Centre, Maybank KE infers that the pre-termination was from banking tenant ANZ. ANZ now also accounts for 3.8% of committed NLA, from 5.1% in 1Q2018.

Keppel REIT’s exposure to Ocean Financial Centre is currently at 31%, the largest amongst its properties.

“Apart from a large pre-termination income received, income contributions from its buildings were broadly within our expectations,” Heng said.

Keppel REIT’s signing rents for its Singapore offices rose to $10.74 psf pm in 1H2018. This is an improvement from $10.05 for leases signed in 1Q18 and $9.80 for the entire 2017. This was corroborated by the 4.1% QoQ increase in Grade-A rents of $10.10, as reported by CBRE.