Keppel REIT acquires 51% of Keppel South Central for $626.2m
The acquisition from sponsor Keppel Limited includes a five-year income support arrangement, contributing to an initial property yield of 4.3%.
Major Property Acquisition
Keppel REIT announced its plan to purchase a 51% interest in Keppel South Central from its sponsor, Keppel Limited. The transaction is valued at S$626.2 million. This consideration translates to approximately S$2,350 per square foot (psf) for the 51% share, based on a 70-year leasehold.
Keppel REIT stated that the initial property yield from this acquisition would be 4.3%, a figure that incorporates a specific income support agreement from the sponsor.
Income Support and Occupancy Levels
As part of the deal, Keppel Limited will provide Keppel REIT with a guaranteed monthly income of S$2.23 million for a period of up to five years. This income support arrangement is structured around the property's current rental rates.
As of September 30, Keppel South Central had committed leases and leases undergoing documentation representing 52.7% of its net lettable area (NLA). This figure rose to approximately 60% by October 15, with an average rent of about S$11.30 psf per month, which exceeds the S$11.15 psf per month assumed under the income support terms.
Funding and Financial Impact
Keppel REIT intends to finance the acquisition through a blend of bank loans, perpetual securities, internal cash reserves, and equity financing. Following the acquisition, the aggregate leverage is projected to be 39.2%.
The company estimates a pro forma distribution per unit (DPU) accretion of 2.01%, assuming this acquisition and the earlier divestments of T Tower and KR Ginza II had concluded on January 1. The proposed acquisition requires unitholder approval at an extraordinary general meeting, anticipated in the fourth quarter of 2026, with completion expected in the second quarter of 2027.
Chua Hsien Yang, CEO of Keppel REIT's manager, highlighted that the acquisition structure, offering income stability and future growth potential, positions the REIT to deliver sustainable long-term returns for unitholders. On October 19, Keppel REIT units closed unchanged at 82.5 cents. Shares of Keppel Limited ended the day 3 cents lower, a 0.3% decrease, closing at S$10.07.
Investors will watch for the unitholder vote and the property’s continued leasing progress, particularly for its mid-to-high floors which may command higher rents.
This article is journalism, not investment advice; consult a licensed professional before making financial decisions. Market data is indicative, may be delayed, and should be verified with your broker or exchange before use.
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