Keppel REIT 9M 2025 Results: Strategic Growth, Portfolio Optimisation, and Expansion into Retail

Key Financial Highlights

• Net Property Income (NPI): Increased by 8.6% year-on-year to \$161.3 million, driven by robust demand for Singapore prime office space and contribution from the newly acquired 255 George Street, Sydney.
• Distributable Income (DI) from Operations: Slight decline of 0.6% y-o-y to \$144.6 million, but would have increased by 6.7% if management fees were paid entirely in units.
• Share of Results of Associates: Grew 15.4% y-o-y to \$75.4 million, attributed to higher rentals at Marina Bay Financial Centre and One Raffles Quay, and lower borrowing costs.
• Aggregate Leverage: Stands at 42.2% as at 30 September 2025, with 65% of borrowings on fixed rates and weighted average cost of debt declining to 3.45% per annum.
• High Portfolio Occupancy: Portfolio committed occupancy improved to 96.3%, with a weighted average lease expiry (WALE) of 4.7 years.
• Strong Rental Reversion: Achieved +12.0% rental reversion in 9M 2025.

Portfolio Overview and Expansion

• Diversified Portfolio: \$9.5 billion of prime commercial assets across Singapore (78.5%), Australia (17.7%), South Korea (2.9%), and Japan (0.9%).
• Singapore Portfolio: Anchored by iconic assets including Ocean Financial Centre, Marina Bay Financial Centre, One Raffles Quay, and Keppel Bay Tower, all with occupancy rates above 92%. Singapore remains the key contributor (84.7%) to gross rent.
• Australian Portfolio: Key assets include 255 George Street, 8 Chifley Square, 2 Blue Street, Pinnacle Office Park, 8 Exhibition Street, Victoria Police Centre, and David Malcolm Justice Centre, with occupancy largely above 90%.
• Expansion into Retail: Acquisition of 75% Interest in Top Ryde City Shopping Centre, Sydney: Marks Keppel REIT’s strategic entry into retail, enhancing stability and resilience. Purchase consideration is A\$393.8 million (S\$334.8 million) at an attractive property yield of 6.7%. The acquisition is expected to be accretive to DPU (1.53% pro forma uplift) and will complete by 1Q 2026. This move diversifies the portfolio beyond offices, potentially boosting future earnings and supporting share price.

Portfolio and Tenant Details

• Tenant Base: 499 tenants, with top 10 tenants contributing 30.4% of committed gross rent. Major tenants include Standard Chartered Bank, DBS, TikTok, Ernst & Young, and government agencies in Australia.
• Sector Exposure: Banking, insurance and financial services (38%), technology/media/telecom (24.1%), manufacturing/distribution (9.5%), energy/resources/shipping/marine (7.6%), and real estate/property services (6.2%).
• Lease Expiry Profile: Well-staggered lease expiries and rent reviews, minimizing concentration risk. Average signing rent for Singapore office leases in 9M 2025 was \$12.85 psf pm.

Strategic Portfolio Optimisation

• Active Asset Management: Keppel REIT has continued its track record of enhancing returns through strategic acquisitions and divestments, including recent divestments at sizable gains (e.g., 275 George Street, Brisbane, sold at +47% gain).
• Focus on Capital Efficiency: The REIT is actively managing debt maturities and hedging profiles, with sustainability-focused funding now constituting 82% of total borrowings.

ESG Leadership

• ESG Ratings: Maintained MSCI ESG rating of ‘A’ and top scores in ISS Governance and GRESB benchmarks.
• Green Credentials: 100% of properties are green certified, with major assets achieving BCA Green Mark Platinum and Super Low Energy certifications. Eight properties are fully powered by renewable energy, and five are carbon neutral.
• Sustainability Initiatives: 2 Blue Street achieved a 6-star Green Star rating and installed a 97kW solar panel system in August, reinforcing Keppel REIT’s commitment to ESG excellence.

Market Outlook

• Singapore Office Market: Core CBD (Grade A) rents increased to \$12.20 psf pm, with occupancy at 94.9% in 3Q 2025. Upcoming supply is limited, supporting further rental growth.
• Australia Office Market: Prime grade occupancy remains healthy in Sydney (85.5%) and Melbourne (81.7%).
• Seoul and Tokyo: High occupancy rates in both CBDs, but Seoul saw a temporary dip to 91.5% due to tenant relocations. Tokyo Grade A and B offices maintain occupancy above 98%.

Shareholder Considerations & Price Sensitivities

• Strategic Acquisition into Retail: The upcoming acquisition of Top Ryde City Shopping Centre is significant. It is expected to be DPU accretive and diversifies income streams, which could be positively received by investors and potentially move the share price.
• Strong Operating Performance: Growth in NPI, high occupancy, strong rental reversion, and disciplined capital management all underpin stable distributions and may support further share price appreciation.
• ESG Leadership: Continued ESG excellence may attract institutional investors and ESG-focused funds, enhancing demand for units.
• Interest Rate Sensitivity: With 65% of borrowings on fixed rates and declining cost of debt, Keppel REIT is well positioned against interest rate volatility, though a 100bps increase in rates could reduce interest coverage ratio from 2.6x to 1.9x.
• Debt Maturity: Well-spread maturities and active refinancing discussions reduce refinancing risk for 2026.

Conclusion

Keppel REIT’s 9M 2025 results demonstrate strong financial and operational performance, strategic portfolio growth, and expansion into the resilient retail sector. The DPU accretive retail acquisition, robust Singapore office market, and sustained ESG leadership position the REIT for continued growth and stability. Investors should closely watch the completion of the Top Ryde City Shopping Centre acquisition and ongoing market developments, as these may have a direct impact on future distributions and unit price.

Disclaimer

The information in this article is based on Keppel REIT’s public disclosures and is intended for informational purposes only. It does not constitute investment advice or a recommendation to buy or sell securities. Past performance is not indicative of future results and investments in REITs are subject to risks, including fluctuations in property values, interest rates, and market conditions. Investors are advised to conduct their own due diligence and consult their financial advisor before making investment decisions.

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