We are neutral on Keppel REIT’s acquisition of a shopping centre in Sydney. While the acquisition price is fair, in our view, the addition of a new retail asset class in the Australian market dilutes Keppel REIT’s overall investor appeal as a prime office landlord.
Maiden acquisition of a pure-play retail asset.
- Read this at SGinvestors.io -
TPSC, a freehold mall built in 2010 (refurbished in 2016), is part of a mixed-use development which includes a residential component.
- Read this at SGinvestors.io -
Australia will account for ~20% of portfolio.
Occupancy stands at 96%, and as part of the acquisition, the vendor has provided a rent guarantee of AUD11.4m (S$9.7m) that can be utilised at the discretion of the purchaser to fund potential rent shortfall, leasing commission, and/or incentives.
Weighted average lease expiry (WALE) by gross rent is 4.2 years with an evenly spread out lease profile. The mall mainly caters to non-discretionary tenants, who account for 77% of income, with top tenants being supermarkets such as Coles, Woolworths, and The Growers.
Post acquisition (completion expected by 1Q26), Australia will account for ~20% of Keppel REIT’s portfolio value (Singapore: 76%), with the retail sector accounting for ~4%. Keppel REIT intends to raise its retail exposure to up to ~20% in the medium-term.
Mild pro-forma DPU accretion of 0.9%
Read more at SGinvestors.io.
Above is an excerpt from a report by RHB Securities Research. Clients of RHB may be the first to access the full PDF report @ https://www.rhbtradesmart.com/.
