Is Keppel REIT A Good Buy In 2026? [Fundamental Analysis]

In this article, we'll conduct a fundamental analysis and review of Keppel REIT and its suitability to achieve the following investment objective: To deliver a stable dividend yield of 5% to 6% per year while having high capital preservation ability.

Business Description

Keppel REIT is an office REIT that was listed in 2006 and owns mainly prime commercial properties across Singapore, Australia, Korea and Japan.

What I Like About Keppel REIT:

• The quality of the underlying properties is rock solid with a high exposure in grade A properties in Singapore thereby providing a high stability in the operating performances.

  
  

• Properties have high weighted average lease expiry and high tenant retention track record over the years (Figure 13)

  
  

• Tenants are well diversified and are mostly either MNCs or government agencies that have the purchasing power and need to renew their leases regardless of economic cycles.

What I Do Not Like About Keppel REIT:

• The headline distribution per unit/dividend yield is heavily affected (around 40%) by non-operational items (i.e. capital distribution and income support) as well as non-cash items (i.e. management paid in units) which makes valuation a bit tricky (Figure 7).

• Management is slowly diversifying away from local offices but has expressed their intention to cap retail exposure to no more than 20%.

Updates From Recent Performance (FY 2025)

General Comments:

• The manager has elected to receive 75% of base and performance fees in units in FY2025 as opposed to the usual 100%. As a result, reported DPU fell by 5.19% even though DPU from operations grew by 4.37%.
  

• Capital gains ($6m) & anniversary distribution of ($20m per year) will help support the distribution per unit till 2027. (FY2025: 12.20% Of DPU)
  

• Gross revenue (+4.9%) and Net Property Income (+6.9%) grew accordingly due to positive (11.5%) rent reversion and a full year contribution from 255 George Street.
  

• 2025 saw a few acquisitions, both local and in Australia (see next page for detailed breakdown). Post acquisition, Singapore exposure expanded to 79.8% from 75.8%.
  

• Keppel REIT started using perpetual securities for their capital management in 2025. Total Perps issued stand at $400m.

Positive Headwinds:

• -

Negative Headwinds:

• Potential for higher operating expenses and borrowing costs due to the inflationary impact of the ongoing Middle East conflict.
  

• DPU for FY2026 should see a dilution due to the dilutive acquisition of MBFC 33.33% in FY2025. This should be partially offset by Top Ryde City’s contribution.

  
  

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Disclaimer:

This article is meant to be the opinion of the author

This article is for information purposes only

This article should not be seen as financial advice

This advertisement has not been reviewed by the Monetary Authority of Singapore