Keppel REIT to Acquire Additional One-Third Interest in Marina Bay Financial Centre Tower 3

Key Highlights from the Announcement

• Acquisition of Prime CBD Asset: Keppel REIT is acquiring an additional one-third interest in Marina Bay Financial Centre (MBFC) Tower 3, increasing its ownership to two-thirds of the property. The deal is valued at an estimated S\$908.1 million for the one-third stake, based on an agreed property value of S\$1,453.0 million (1/3 interest) at S\$3,268 per sq ft, which is a 1.0% discount to the independent valuation of S\$1,467.3 million.
• Strategic Expansion: The acquisition strengthens Keppel REIT’s presence in Singapore’s Core CBD, particularly the highly sought-after Marina Bay area, and supports its strategy to deliver sustainable long-term returns by investing in premium commercial assets in key Asia-Pacific business districts.
• Rare Opportunity: Landmark Grade A office assets in Marina Bay rarely become available, making this a unique opportunity for Keppel REIT to increase its exposure to one of Singapore’s most prestigious business addresses.
• Financing Structure: The acquisition will be financed primarily (94.5%) through an underwritten non-renounceable preferential offering, expected to issue 923.2 million new units and raise S\$886.3 million in gross proceeds. The remainder (5.5%) will be funded by debt.
• Financial Impact: The move will increase Keppel REIT’s Singapore portfolio exposure from 75.8% to 79.0% and could potentially enhance market capitalisation and trading liquidity, possibly improving its position on the Straits Times Index (STI) reserve list.
• Occupancy and Rental Upside: MBFC Tower 3 is 99.5% occupied as at September 2025, with a weighted average lease expiry (WALE) of 3.5 years. The property’s passing rent is 10% below the Marina Bay average, indicating potential for rental upside and future income growth.
• Strong Market Fundamentals: Singapore’s Grade A office market remains robust, with core CBD office vacancies tightening to 5.1% and no new office supply expected in the Marina Bay area from 2026 to 2029, supporting potential rental and capital appreciation.
• Completion Timeline: The deal is set to complete by 31 December 2025, after which the vendor and its affiliates will be released from further obligations under the existing shareholders’ agreement.
• Major Transaction Classification: Based on SGX Listing Manual rules, the deal is classified as a “major transaction” but does not require Unitholder approval as it is in the ordinary course of business and does not change Keppel REIT’s risk profile.

Details of the Acquisition

The property, MBFC Tower 3, is a 46-storey premium Grade A office tower with a remaining leasehold tenure of 80.2 years. It forms part of the MBFC integrated development, which also includes two other office towers, two residential towers, and Marina Bay Link Mall. The building is anchored by DBS Bank and has a diversified tenant base comprising leading financial institutions, legal firms, and technology and media companies. The total net lettable area is approximately 1.3 million sq ft, with 357 car park lots. The building is directly connected to Downtown MRT and is close to multiple other MRT lines, ensuring excellent accessibility.

The agreed property value for the one-third interest is S\$1,453.0 million, about 1% below the independent valuation. Including acquisition fees and estimated transaction expenses, the total acquisition cost is approximately S\$937.5 million.

On completion, the existing shareholders’ agreement will be amended, releasing the vendor and its affiliates from further obligations.

Potential Implications for Shareholders

• Potential Share Price Catalyst: The acquisition strengthens Keppel REIT’s position in a prime location and is likely to be viewed positively, given the scarcity and desirability of such high-quality office assets. The deal is also structured at a discount to the latest independent valuation.
• Increased Market Capitalisation and Liquidity: The preferential offering will expand the unit base by 23%, potentially enhancing trading liquidity and visibility within the investment community.
• Distribution and NAV Impact: Pro forma financials indicate a short-term dilution in distribution per unit (DPU), with DPU expected to decrease by 3.6% to 6.4% (depending on interest rate assumptions) for FY2024. NAV per unit is also expected to decrease from S\$1.24 to S\$1.18. However, these calculations are made on a pro forma basis and may not reflect the full upside potential from future rental growth and asset value appreciation.
• Aggregate Leverage: The REIT’s aggregate leverage will temporarily rise to 49.9% immediately after the acquisition (before receipt of the preferential offering proceeds) but will fall to 41.9% once the net proceeds are used to repay the bridging loan, maintaining a healthy balance sheet position.
• No Unitholder Vote Required: While the transaction is classified as major under SGX rules, it does not require Unitholder approval, as it is within the REIT’s investment mandate and does not alter the risk profile.
• Directors’ Interests: The announcement discloses relevant directorships and confirms that, apart from these, no other directors or controlling unitholders have an interest in the acquisition.

Risks and Considerations

• The acquisition involves the issuance of a significant number of new units, which will dilute existing Unitholders’ interests and reduce DPU and NAV per unit in the short term.
• The deal assumes continued strength in the Singapore office market and successful execution of rental reversions and occupancy strategies.
• Tax transparency for the acquired asset is assumed but not guaranteed; lack of such status could further impact DPU.
• Aggregate leverage will temporarily spike before the preferential offering proceeds are received.

Investor Takeaway

This acquisition represents a strategic, price-sensitive transaction that increases Keppel REIT’s exposure to a rare, high-quality Singapore CBD asset at an attractive valuation. While there is a short-term dilution to DPU and NAV, the transaction enhances portfolio resilience, offers significant potential for rental and capital appreciation, and could boost Keppel REIT’s market standing and liquidity. Investors should weigh the short-term financial impacts against the long-term strategic benefits and the unique opportunity to own a greater share of one of Singapore’s most prestigious office towers.

Disclaimer: This article is for informational purposes only and does not constitute investment advice or an offer to buy or sell any security. Investors should conduct their own research and consult their financial advisors before making investment decisions. The value of investments and income derived from them may go down as well as up. Past performance is not indicative of future results. Keppel REIT units are not guaranteed by the manager, trustee, or their affiliates, and investors may lose their principal.

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