Keppel REIT: Operating Statistics Remain in Line, but US Tariffs Create Near-Term Leasing Volatility

Keppel REIT’s first-quarter net property income rose 13.3% year on year to SGD 54.6 million, driven by contributions from 255 George Street and 2 Blue Street. The share of results from its associates increased 11.0%, underpinned by higher rental income. However, distributable income from operations fell 3.5% due to higher borrowing costs from the refinancing done in 2024 and from an increase in debt taken on to acquire 255 George Street. As the business update was in line with our expectations, we maintain our fair value estimate of SGD 1.16 per unit. While US tariffs create uncertainty in the leasing market, we think the risks are priced in for the trust. We view Keppel REIT as undervalued, trading at an attractive 2025 dividend yield of 6.8%. We expect the trust’s long-weighted average lease expiration of 4.7 years to help it weather any near-term economic weakness.