Keppel REIT Delivers Robust 9M 2025 Results and Announces Strategic Expansion Into Australian Retail—A New Era for Unitholders?

Key Highlights: What Investors Need to Know

• Net Property Income (NPI) surged by 8.6% year-on-year, driven by strong contributions from 255 George Street, resilient demand for prime office space in Singapore, and lower borrowing costs at associate level.
• Committed occupancy climbed to 96.3%, with a healthy 12.0% rental reversion.
• Weighted average cost of debt improved from 3.51% in 1H 2025 to 3.45% in 9M 2025, reflecting positive impact from easing benchmark rates.
• Distributable income from operations would have increased 6.7% year-on-year if management fees were paid fully in units, demonstrating underlying operational strength.
• Strategic acquisition of a 75% stake in Top Ryde City Shopping Centre, a high-quality freehold mall in Sydney, marking Keppel REIT’s first pure-play retail investment.
• All assets now green certified, after 2 Blue Street achieved a 6-star Green Star rating in North Sydney.
• Private placement to fund acquisition was three times oversubscribed, raising approximately \$113 million.
• Aggregate leverage stood at 42.2%, with 65% of borrowings on fixed rates and 82% of borrowings sustainability-focused.
• Portfolio value exceeds \$9.5 billion, spanning Singapore, Australia, South Korea, and Japan.

Financial Performance: Growth and Resilience

Keppel REIT has posted a solid set of numbers for the first nine months of 2025. Property income reached \$204.5 million (up 5.5%), and NPI grew to \$161.3 million (up 8.6%). NPI attributable to Unitholders climbed 9.5% to \$147.1 million. The share of results from associates—primarily Marina Bay Financial Centre and One Raffles Quay—jumped 15.4% to \$75.4 million.

Distributable income, including the Anniversary Distribution, was \$159.6 million for 9M 2025. If management fees were paid entirely in units, distributable income would have increased by 6.7% year-on-year, signaling robust underlying cash generation. The report notes higher borrowing costs resulted from new borrowings and refinancing at market rates following the acquisition of 255 George Street, but these were offset by operational gains.

Portfolio Developments: Major Acquisition in Australia

In a move likely to reshape the portfolio and investor expectations, Keppel REIT announced the proposed acquisition of a 75% interest in Top Ryde City Shopping Centre for A\$393.8 million. This freehold mall in the City of Ryde, Sydney boasts 96% occupancy and a WALE of 4.2 years. Critically, 77% of gross rental income is derived from non-discretionary retailers, including anchors such as ALDI, Big W, Coles, Kmart, and Woolworths, making the asset highly defensive. The mall sits within a mixed-use precinct, strengthening its resilience.

The acquisition is expected to deliver a fully leased initial property yield of 6.7% and a pro forma adjusted DPU accretion of 1.53% (assuming 25% of management fees are paid in cash; 1.25% accretion if paid fully in units). Subject to regulatory clearance, completion is targeted for 1Q 2026.

To finance the deal, Keppel REIT raised about \$113 million via a private placement, which was three times oversubscribed, indicating strong market confidence and providing ample liquidity for growth.

Capital Management and Debt Profile

• Aggregate leverage: 42.2%
• Fixed-rate borrowings: 65%
• Weighted average term to maturity: 2.7 years
• Interest coverage ratio: 2.6x
• Sustainability-focused funding: 82% of borrowings
• No significant loan maturities for the remainder of 2025; 40% loans due in 2026 mature in 1H, remainder in 2H

Operational Metrics and Sustainability Achievements

• Approximately 1.46 million sf of leases committed in 9M 2025, with banking/finance and TMT sectors leading new demand.
• Weighted average signing rent for Singapore CBD office leases: \$12.85 psf pm; upcoming lease expiries averaging \$11.35–\$12.15 psf pm.
• Portfolio WALE: 4.7 years; Top 10 tenants WALE: 8.9 years
• 100% green-certified portfolio, with 2 Blue Street attaining the highest 6-star Green Star rating in North Sydney.
• GRESB 2025: Higher score, retained 4-star rating and Green Star status.

Market Outlook: What Could Move the Shares?

Keppel REIT’s strong operational performance and strategic expansion into retail—especially a defensive asset like Top Ryde City Shopping Centre—could drive investor enthusiasm and potentially re-rate the units. The oversubscription of the private placement signals robust institutional and global investor appetite. Improvements in rental reversion, occupancy, and debt costs further support the potential for upward movement in distributable income and DPU, both key drivers for REIT valuations.

Risks include rising borrowing costs from additional debt, potential integration challenges with the new retail asset, and broader market headwinds. However, the REIT’s commitment to sustainability, disciplined capital management, and stable portfolio metrics position it well for continued growth.

Conclusion: Is Keppel REIT Entering a New Growth Phase?

With the latest results, strategic acquisition, and portfolio enhancements, Keppel REIT looks poised for further growth and resilience. Investors should watch for regulatory approval on the Top Ryde City Shopping Centre deal and monitor distributable income trends and DPU accretion, which could be price sensitive and impact unit valuations. The strong fundamentals, sustainability achievements, and diversification into retail offer potential catalysts for share price movement.

Disclaimer

This article is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future results. Forward-looking statements are subject to risks, uncertainties, and assumptions. Please consult your financial advisor before making investment decisions. Keppel REIT units are subject to market risks, and investors may lose the principal invested.

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