Keppel REIT, which has a portfolio of commercial assets, is looking to expand into the retail asset class.
On Oct 8, the REIT manager announced that it has entered into an agreement to acquire a 75% effective interest in Top Ryde City Shopping Centre for A$393.8 million ($334.8 million). Top Ryde City Shopping Centre is a freehold retail mall located along Devlin Street in the City of Ryde, Sydney.
The mall is part of a mixed-use development which includes a residential component. It offers an aggregate lettable area of 77,054 sqm with 2,739 car park lots.
As at June 30, the mall has a high committed occupancy rate of 96% and a long weighted average lease expiry (WALE) of 4.2 years by committed gross rent. It has strong performing tenants such as ALDI, Big W, Coles, Kmart and Woolworths and has non-discretionary tenants accounting for 77% of the total gross rental income.
The mall is expected to deliver a fully leased initial property yield of 6.7% and pro forma adjusted distribution per unit (DPU) accretion of 1.34%. This is based on Keppel REIT’s DPU for the FY2024 assuming that the acquisition was completed on Jan 1, 2024, and 25% of the management fees for that year were paid in cash. If 100% of the management fees were paid in units for FY2024, the pro forma DPU accretion would be 0.89%.
According to Keppel REIT, referring to findings from the Australian Bureau of Statistics, nominal retail sales in the country remained “resilient” through the Covid-19 pandemic and exceeded pre-pandemic levels. This trend is likely to persist. In addition, regional shopping centres in Australia are said to enjoy the highest occupancy rates with a vacancy rate of 2.1% in 2024, the lowest among Australia’s shopping centres.
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“The diversification allows Keppel REIT to benefit from enhanced portfolio resilience as Australian retail malls offer attractive yields, with suburban retail assets demonstrating resilience and strong growth potential supported by long-term consumption growth and population increase,” says Chua Hsien Yang, CEO of the REIT manager. “This DPU-accretive acquisition is expected to enhance Keppel REIT’s overall returns, while strategically complementing its Singapore office-focused portfolio.”
The acquisition will be funded through debt, equity and perpetual securities. It is expected to be completed by 1Q2026.
In a separate announcement, Keppel REIT said it will launch a private placement to raise gross proceeds of around $113 million.
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The REIT intends to issue around 112.5 million units priced at between 98.3 cents and $1.004.
Post-acquisition, Keppel REIT’s Singapore-centric portfolio value will increase to $9.8 billion across 14 properties in Singapore (76.0%), Australia (20.2%), South Korea (2.9%) and Japan (0.9%), with office assets comprising 95.8% and retail assets comprising 4.2% of the portfolio value.
Units in Keppel REIT closed at $1.03 on Oct 7.
