Gross proceeds of S$886.3 million will go into funding the purchase of another one-third interest of Marina Bay Financial Centre&rsquo s Tower 3

 

[SINGAPORE] Keppel Real Estate Investment Trust (Reit) has received valid acceptances of 76.9 per cent at the close of its preferential offering announced on Dec 11, 2025.

 

In a bourse filing on Tuesday (Jan 13), the manager of the Reit said it received valid acceptances for 709.4 million units, out of the 923.2 million units on offer.

 

It received excess applications of 185.7 million units, or 20.1 per cent of the total number of units available under the preferential offering.

 

This brings the total number of valid acceptances and excess applications to 895.1 million units, or 97 per cent of the total units available, at the close of the offering on Jan 9, 2026.

 

Keppel, Keppel Reit Investment, Keppel Capital Investment Holdings and Keppel Reit Management have accepted in full their respective provisional allotments, totalling 343.9 million new units.

 

The new units will be listed on the Singapore Exchange from 9 am on Jan 19.  

 

The manager on Dec 11 launched the underwritten, non-renounceable preferential offering to raise gross proceeds of S$886.3 million, to fund the acquisition of an additional one-third interest in Marina Bay Financial Centre (MBFC) Tower 3.

 

Under the preferential offering, entitled unitholders will be offered 23 new units for every 100 existing units held, at S$0.96 for each new unit. 

 

DBS, OCBC and UOB were the joint bookrunners and underwriters for the offering.

After the S$1.45 billion sale of its Tower 3 stake, Hongkong Land pumped its remaining MBFC interests into a new Singapore private real estate fund

 

[SINGAPORE]   Keppel Reit   : K71U -0.51% &ndash which recently bought a one-third stake in Marina Bay Financial Centre (MBFC) Tower 3 from   Hongkong Land   : H78 +1.44% for S$1.45 billion &ndash was keen to snap up even more of the Grade-A commercial project, but was held back as its gearing neared the regulatory limit.

 

&ldquo These are good assets&hellip we could not have acquired any more than MBFC Tower 3,&rdquo said Chua Hsien Yang, CEO of the real estate investment trust&rsquo s (Reit) manager, in a Tuesday (Dec 30) dialogue with the Securities Investors Association (Singapore).

 

The acquisition brought Keppel Reit&rsquo s pro forma aggregate leverage up to 49.9 per cent, which is just below the Monetary Authority of Singapore&rsquo s limit of 50 per cent.

 

The deal will be funded with 60 per cent equity and 40 per cent debt, instead of recycled capital through divestments.

 

&ldquo If we had the benefit of time, that is something we could have done,&rdquo said Chua. &ldquo However, we had only 20 calendar days to respond to the pre-emptive offer notices. There was no way we could have sold any asset within that limited time period.&rdquo

 

He said the manager therefore &ldquo had to let the offers for MBFC Tower 1, Tower 2 and One Raffles Quay lapse&rdquo . Hongkong Land pumped these remaining assets into a new Singapore private real estate fund when the right-of-first-refusal expired. 

 

RHB analyst Vijay Natarajan was &ldquo slightly negative&rdquo on the deal. He recommended on Friday that unitholders switch to   Suntec Reit   : T82U -2.08% from Keppel Reit for office exposure.

 

Keppel Reit had previously bought one-third of MBFC Tower 3 from its sponsor Keppel. The remaining one-third is still owned by anchor tenant DBS.

 

Given its gearing ratio, the Reit is funding its latest stake purchase through an S$886 million preferential offering of over 923 million new units and 40 per cent debt. 

 

Chua said the Reit&rsquo s &ldquo focus for 2026 will be on divestments to bring down aggregate leverage&rdquo .

 

To drive yield, Keppel Reit is banking on positive rental reversions and a structural unlock of S$8 million to S$10 million in annual tax savings, following its dilutive acquisition of an additional stake in MBFC Tower 3.

 

The manager also outlined a clear road map to recover value: capturing the 10 per cent gap between the property&rsquo s passing rents and market rates, while simultaneously executing a &ldquo tax transparency&rdquo conversion to secure immediate cash-flow savings.

 

&ldquo We believe that this deal will be accretive over time,&rdquo said Chua. He cited the &ldquo rental uplift potential&rdquo from the 30 per cent of leases expiring in the next two years.

 

Chua pointed out that third-quarter signing rent in 2025 was close to the breakeven passing rent, which is &ldquo not unreachable&rdquo as the Reit has already achieved rentals above that mark. 

 

Additionally, the tax savings &ndash expected to take six months to approve &ndash will be unlocked through the Reit&rsquo s conversion of the property&rsquo s holding entity to a limited liability partnership.

 

The numbers provided by Keppel Reit&rsquo s manager indicated that if the purchase had been completed at the start of 2024, its distribution per unit (DPU) for that year would have been 6.4 per cent lower, assuming a blended debt cost of 3.3 per cent. 

 

Even with a lower blended debt cost of 2.2 per cent, the DPU would still have been 3.6 per cent lower.

 

Despite this, Chua defended the acquisition as a &ldquo highly strategic opportunity&rdquo as the property is in a market that has no new office supply coming in the next few years. 

 

With no new land to be released any time soon in the Central Business District and construction requiring at least five years, he believes the lack of new supply will support rental growth.

 

Chua said MBFC Tower 3 was prioritised for its resilience, citing the presence of DBS as a key tenant. He highlighted that the bank, a &ldquo globally recognised financial institution with an investment-grade credit rating&rdquo , provides &ldquo income security&rdquo that justifies the selection of this asset over others.

 

To address concerns regarding alignment with unitholders, the manager confirmed it would receive its management fees entirely in units. 

 

Chua also pointed out that   Keppel   : BN4 +0.19% holds about a 37 per cent stake in the Reit, ensuring the sponsor is motivated to see the unit price perform.

 

&ldquo The management team is committed to continue delivering strong dividends for investors,&rdquo he added. &ldquo There are a lot of retirees that depend on our distributions and we are conscious of this.&rdquo

Meanwhile, DBS Group Research says office S-Reits offer &lsquo brightest prospect&rsquo in 2026

 

[SINGAPORE] Investors seeking office Singapore-listed real estate investment trusts (S-Reit) exposure should consider switching from   Keppel Reit   : K71U -0.51% to   Suntec Reit   : T82U -2.08%due to the latter&rsquo s &ldquo slightly negative&rdquo deal for a one-third stake in Marina Bay Financial Centre (MBFC) Tower 3.

 

Funding for the deal, which was announced in December 2025, should have come from divestments instead of &ldquo significant dilutive&rdquo equity fundraising and tight pricing, said RHB analyst Vijay Natarajan in a note on Friday (Jan 2).

 

The analyst kept a &ldquo neutral&rdquo rating but lowered Keppel Reit&rsquo s target price to S$0.98 from S$1.05, with zero per cent upside.

 

Natarajan&rsquo s comments come shortly after the manager of Keppel Reit shared a transcript of a dialogue with the Securities Investors Association (Singapore) earlier on Friday. The manager said it was unable to fund the acquisition from divestments as it only had 20 calendar days to respond to the pre-emptive offer notices from Hongkong Land.

 

Keppel Reit recently completed the purchase of a one-third stake in MBFC Tower 3 from Hongkong Land for S$1.45 billion, with the deal set to dilute both distribution per unit (DPU) and net asset value (NAV). This is despite the property&rsquo s &ldquo strong positioning&rdquo as a &ldquo high-quality Grade-A&rdquo office.

 

The acquisition price of S$1.45 billion, or S$3,268 per square foot, is a &ldquo hefty 4.7 per cent premium&rdquo to the property&rsquo s December 2024 carrying value, though a 1 per cent discount to its latest valuation, noted Natarajan.

 

The asset&rsquo s remaining 80-year lease and net property income yield of about 3.5 per cent at the acquisition price, was also deemed to be &ldquo slightly on the lower side&rdquo .

 

The deal will be partly funded by issuance of a preferential offering of 23 new units for every 100 existing units at S$0.96. As the new units are issued at about 23 per cent below book value, the transaction will dilute NAV by about 5 per cent, noted Natarajan. 

 

The gearing after acquisition is expected to be at 41.9 per cent, which the analyst said is &ldquo slightly on the higher side&rdquo .

 

&ldquo Our forecasted FY2026 and 2027 DPU are revised lower by 8 per cent and 9 per cent, respectively, after factoring in the recent acquisition, equity fundraising, perpetual securities issuance, and debt funding costs,&rdquo he added.

 

Office sector the top pick for DBS

Meanwhile, analysts from DBS&rsquo research arm on Friday flagged the office sector as the primary driver of S-Reit growth for 2026, ranking it ahead of the industrial and retail sectors due to a multi-year supply drought and strengthening pricing power in Grade A assets.

 

They described both the office and industrial sector as the &ldquo brightest prospects&rdquo for these Reits in 2026.

 

Among office S-Reits, the analysts highlighted   CapitaLand Integrated Commercial Trust   : C38U -0.42% as a top alpha pick to benefit from &ldquo landlord-friendly&rdquo fundamentals, including restricted office supply and a positive rent growth outlook.

 

The office sector conviction is set against a broader positive backdrop, where the research arm projects S-Reits to enter a sustained two-year earnings upgrade cycle through 2027. Its analysts expect the three-month Singapore Overnight Rate Average to anchor at 1.2 to 1.3 per cent &ndash significantly below recent levels &ndash driving a 2.5 per cent uplift in DPU that markets have not yet fully priced in.

 

With valuations attractive at 0.9 times price-to-book and yields offering a spread of 3.7 per cent against the 10-year bond, DBS Group Research said this was an ideal entry point for a sector-wide re-rating.

 

While the office sector is its top preference, the industrial sector remains a key weight. DBS Group Research favoured industrial S-Reits such as   Mapletree Logistics Trust   : M44U 0% and   CapitaLand Ascendas Reit   : A17U 0%, supported by robust demand from tech, biomedical and digitalisation trends.

 

Conversely, the retail sector was downgraded due to anticipated consumption leakage to Johor once the RTS Link opens and the tapering of CDC and SG60 vouchers.