Keppel REIT share price so bad its good?

Did Keppel REIT bite off more than it can chew? After charging to a 3-year high of $1.10 on 28 November 2025, Keppel REIT share price fell off the cliff following its additional one-third stake of Marina Bay Financial Center (MBFC) Tower 3 from Hong Kong Land for a whopping $1.45 billion. To support the acquisition, Keppel REIT has launched a mega Equity Fund Raising (EFR) of $886.3 million.

Obviously, no S-Reit unitholders like EFR. In this context, it’s understandable that unitholders of Keppel REIT are boiling over the mega $886.3 million EFR. Imagine having 923 million of new units flooding the market. It will be a miracle if Keppel REIT share price does not dive on 19 January 2026, the day of the listing of the new units. To make matters worse, this mega EFR came right after the $113 million Private Placement in October 2025.

The new units are issued on the basis of 23 new units for every 100 existing units at an issue price of $0.96. Currently, Keppel REIT share price is being traded at $0.97. Following the listing of the new units, there may be a possibility of Keppel REIT share price falling below $0.90 due to short-term negative sentiments.

Generally speaking, investors do not like acquisitions that cause dilution to both unit price and distribution per unit (DPU). Most acquisitions made by S-REITs are DPU accretive. This was the case for Keppel REIT’s Top Ryde City Shopping Centre in Sydney. During the launch of the Private Placement, Keppel REIT stated clearly that that acquisition will be DPU accretive. However, for the latest acquisition, the Manager shared that the pro forma DPU will drop to 4.42 cents from 4.72 cents (excluding anniversary dividend). Net asset value (NAV) will also drop to $1.18 from $1.24.

But what makes this transaction inexplicable to many unitholders is that the Manager is charging Management fee for acquiring an additional one-third interest in MBFC Tower 3. My initial thought is that Keppel REIT already owned one-third interest in MBFC Tower 3 in the first place, so it could have waived off the Management fee as a goodwill gesture to existing unitholders. My opinion is that this transaction should not be viewed as an outright “acquisition” of a new asset.

Nevertheless, the Manager assured that the Management fees will be entirely in units so as to optimise capital value and the operational performance of Keppel REIT.

Against the backdrop of falling SORA (Singapore Overnight Rate Average) interest rates, Keppel REIT wasted no time in jumping on the bandwagon of acquiring assets to drive growth. In this article, I will share my insights on the outlook of Keppel REIT share price in 2026.

Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. Furthermore, I am not vested and have never invested in Keppel REIT before. Whether Keppel REIT share price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.

Keppel REIT share price faces litmus test

First thing first: I have empathy for existing unitholders of Keppel REIT. Following the ravage of pandemic, Keppel REIT share price struggled to restore to its pre-pandemic levels of $1.10 – $1.20. In October 2023, the counter even fell to a low of $0.80, causing many unitholders to lose confidence in the stock. As such, you can imagine the giddiness of unitholders as Keppel REIT turned bullish in 2025 to hit a high of $1.10.

Turnaround stories of SGX stocks are rare. Thus, unitholders must be gutted by the latest acquisition, which is likely to cause Keppel REIT share price to turn bearish again. I suspect some unitholders may not have the patience to wait out the latest winter and may take this opportunity to bolt for the exit. This is especially so given that the DPU will be diluted.

Keppel REIT explained that it could not recycle capital through divestments for this acquisition because they have only 20 calendar days to respond to the pre-emptive offer notices. The short notice meant that they could not have sold any asset within that period of time.

Based on the compressed timeline, my concern is whether the Manager has done sufficient due diligence in taking a deep delve on the benefits that this acquisition will bring to unitholders. The key basis for making this acquisition is that they “believe that Tower 3 is a very good asset, with DBS as a key tenant. DBS is a strong name in Singapore as well as a globally recognised financial institution with an investment-grade credit rating. The presence of DBS provides income security and portfolio resilience”. Somehow, this smells like a FOMO to me.

Although having DBS as anchor tenant is compelling, the justification is too narrow and should entail more in-depth research. For example, how will this acquisition close its gap between Grade A office competitors like CapitaLand Integrated Commercial Trust (CICT) and Suntec REIT?

In the transcript for the SIAS-Keppel Dialogue Session, CEO Chua Hsien Yang appears to be convinced that Singapore economy is expected to continue to remain strong, and that the new asset will perform very well. However, I do think it is too premature to throw caution to the wind as macroeconomic may turn sour in 2026 due to geopolitical issues. We do not know the full extent of US trade tariffs on Singapore’s economy as the trade tariffs will go into full swing in 2026.

And then there is also no assurance that the Fed will continue cutting interest rates in 2026. If inflation persists and employment remains healthy in US, the Fed may hold interest rates steady. If so, Keppel REIT may continue to grapple with high interest expenses.

Look beyond short term?

The Manager highlighted that this acquisition will bring long-term value for unitholders. To this end, I do not disagree. However, in the long run, we are all dead. This is an indisputable fact. Besides Keppel REIT, unitholders may invest in other office S-REITs, like CapitaLand Integrated Commercial Trust (CICT) and Suntec REIT. Furthermore, the distribution of $100 million of Anniversary Distribution over a 5-year period will end in 2027. By then, Keppel REIT share price may come under pressure due to the lack of support from Anniversary Distribution.

To tackle the issue of DPU dilution, Keppel REIT shared that they may be able to renew the rentals for MBFC Tower 3 when the leases come up for renewal as current average rent rate at the Marina Bay area is $13.49 psf. The current passing rent for MBFC Tower 3 is approximately $12+ psf so there is rental uplift potential.

If unitholders can bite the bullet and stomach the short-term volatility of Keppel REIT share price, this acquisition may well turn out to be a shrewd investment in the long run. This is due to the fact that there is tight supply pipeline of Grade A offices in Singapore’s Downtown Core – only Shaw Tower in Beach Road and Newport Tower in Anson Road are slated for completion in 2026 and 2027, respectively. In fact, recent 90% occupancy of IOI Central Boulevard Towers, a Grade A commercial building, reflects healthy demand for office spaces in Singapore’s CBD. The tight supply pipeline, coupled with foreseeable interest rate cuts on the horizon, has led to a “flight to quality” trend, leading to 2.5% increase in office rental in the city area. Vacancy for office rentals consequently eased to 11.2% from 11.4% in the second quarter.

Recent positive rental reversions and increased occupancy of Keppel REIT office assets indicate that office demand is rebounding strongly and the worst may be over for Keppel REIT. For its Singapore offices, committed occupancy for 3QFY2025 was 96.3%, a slight drop as compared to 2QFY2025. But the performance was offset by the higher rentals, which led to NPI increasing to $197.2 million.

I like Keppel REIT for its portfolio concentration in Singapore and nil exposure to China.  Its Singapore assets included Keppel Bay Tower, One Raffles Quay, Marina Bay Financial Centre and Ocean Financial Centre. Keppel REIT has a portfolio value of over $9 billion, comprising properties in Singapore; the key Australian cities of Sydney, Melbourne and Perth; Seoul, South Korea; as well as Tokyo, Japan.

Massive Equity Funding Rights (EFR)

The latest EFR of $886 million would have rankled existing unitholders given that it came right after the $113 million private placement to fund the acquisition of the Sydney Mall. Obviously, these equity fundings would put pressure on the unit price. And no unitholders like falling unit prices.

However, it is important to put things into perspective. Keppel REIT share price has run up so much in 2025 to the extent that a correction is only healthy. Furthermore, the latest EFR is priced at a discount of 6.8% to its last trading price. In my opinion, the pricing is reasonable.The situation is entirely different for MLT in which the unit price has fallen from a peak of $1.90 to the current $1.30. A massive EFR would pile misery to unitholders. At least for Keppel REIT, they are issuing the EFR from a position of strength – rising unit prices and improving market fundamentals.

I am also of the belief that the Manager have timed the acquisitions as the Fed is cutting interest rates. In fact, Singapore’s SORA has plummeted to a 3-year low. It makes sense to make acquisitions in low-interest rate environment. If the S-Reit does not make DPU-accretive acquisitions now, it would have incurred high interest costs when it acquired assets during high interest times.

Conclusion

Keppel REIT has evolved from a pure-play office Reit player when it acquired the Sydney Mall. I like this S-Reit for being one of the top three premium office players in Singapore. It’s portfolio concentration in Singapore also means that it is relatively less affected by currency fluctuations as compared to MLT.

Although the outlook may be uncertain due to the US trade tariffs, the risk is mitigated by the tight pipeline of Grade A office spaces in Downtown Core. Additionally, the $20 million anniversary dividend should provide support to the DPU.

Prior to the EFR, I had wanted to enter this counter at $1.00. In light of the EFR, I am monitoring the unit price and may take up a small position at $0.80 to $0.85. Till then, enjoy the ride.