Keppel REIT and MA Financials Buy Sydney Mall

Singapore-based Keppel REIT on Wednesday announced that through its sub-trust, it has entered into an agreement to acquire a 75% effective interest in Top Ryde City Shopping Centre, a freehold retail mall in Sydney, Australia, for $258.23 million.

The remainder of the 25% stake is to be acquired by a fund managed by Australia’s MA Financials Group, which will target a distribution yield of 8% and total return of 13% per annum over its forecast 5-year term.

Interestingly, the sale of a 100% interest in a Sydney metropolitan regional shopping centre is rare and only two such transactions took place in the last 22 years.

The net acquisition price also implies a fully leased yield of approximately 7.2% and represents a 45% discount to the Centre’s estimated replacement cost. The Centre is currently 96% occupied and is delivering record trading performance supported by a substantial tenancy weighting to non-discretionary retailers.

Top Ryde City Shopping Centre is a high-quality, freehold mall strategically located along Devlin Street, part of the A3 arterial route connecting northern and southern Sydney. Situated in the City of Ryde, the region has experienced higher population growth and exceeded the average household income of the rest of the New South Wales region.

The mall is part of a mixed-use development which includes a residential component and offers an aggregate lettable area of 77,054 sqm with 2,739 car park lots. With non-discretionary tenants accounting for 77% of the total gross rental income, the mall is anchored by strong performing tenants such as ALDI, Big W, Coles, Kmart and Woolworths. Top Ryde City Shopping Centre is a defensive asset with a high committed occupancy rate of 96% and a long-weighted average lease expiry of 4.2 years by committed gross rent.

Top Ryde City Shopping Centre is expected to deliver a fully leased initial property yield of 6.7% and pro forma adjusted DPU accretion of 1.34%. The acquisition, which will be funded through debt, equity and perpetual securities, is expected to be completed by Q1 of 2026, subject to regulatory approvals.

Post-acquisition, Keppel REIT’s Singapore-centric portfolio value will increase to $7.56 billion across 14 properties in Singapore (76%), 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.

Strategic Expansion

Keppel REIT Management Limited CEO Chua Hsien Yang said that the acquisition of Keppel REIT’s first pure-play retail asset marks a strategic expansion into the retail sector.

He said that 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. “This Distribution Per Unit (DPU)-accretive acquisition is expected to enhance Keppel REIT’s overall returns, while strategically complementing its Singapore office-focused portfolio,” he said.

According to the Australian Bureau of Statistics, nominal retail sales in Australia remained resilient through the COVID-19 pandemic and have exceeded pre-pandemic levels.

As the Australian population continues to increase, retail space per capita is projected to decline. This trend is expected to persist and such divergence underscores the attractiveness of suburban retail assets. Notably, regional shopping centres in Australia enjoy the highest occupancy rates, with a vacancy rate of 2.1% in 2024, the lowest among Australia’s shopping centres.