Back in June, I had written about whether S-REITs had become boring (link here), concluding that boring prices did not necessarily mean bad fundamentals. The October results from three of our vested REITs offer some support for that view, at least for now.
Screenshots from FCT, Keppel DC and Suntec latest presentation slides.
The Results in Brief
Frasers Centrepoint Trust (FCT) closed FY26 with a record DPU of 12.35 cents (+2.0% y-o-y), improved NAV and a lower cost of debt at 3.2%. Aggregate leverage stood at 36.8% as of 30 Sep 2026, following the repayment of borrowings using proceeds from the White Sands divestment, which was completed on the same date. Retail committed occupancy remained high at 99.7%.
Keppel DC REIT (Keppel DC) reported nine-month DPU of 8.571 cents (+11.7% y-o-y), with distributable income up 16.7% and portfolio rental reversion of approximately 14%. Its cost of debt was 2.6% (9M 2026), while the interest coverage ratio stood at 6.5 times. Aggregate leverage rose to 36.2%, mainly due to yen loans drawn for the acquisition of Tokyo Data Centre 4 and 5. Notably, 69.6% of its borrowings are on fixed rates, with an upcoming increase to a high 80s% in Dec 2026, limiting near-term interest rate sensitivity.
Suntec REIT (Suntec) recorded Q3 2026 DPU of 2.017 cents (+13.4% y-o-y). The 3Q26 rental reversions remained positive, with 7.3% for office and 11.2% for retail. Aggregate leverage rose to 43.0%, the highest among the three. The manager plans to divest three Australian assets to reduce earnings drag from high interest environment.
The distribution figures are encouraging, although the reporting periods differ and Suntec's headline growth includes a prior-year Australian withholding tax provision reversal. Nevertheless, the results suggest that these REITs have maintained operating resilience despite the financing challenges. This is consistent with the observation in my Jun 2026 post, though it would be premature to generalise from three REITs to the entire asset class.
The Caveat
Interest rates remain a concern. The US Federal Reserve raised its target rate by 25 basis points in September to 3.75 – 4.00%, its first hike since 2023. A further increase in December is widely expected by economists, although it is not a confirmed decision.
Higher rates do not immediately translate into higher financing costs for every REIT. The impact depends on debt maturities, fixed-rate borrowings, hedging arrangements and the ability to refinance on favourable terms. Thus, in my view, it takes at least one year for the effects to be felt.
The Bedokian’s Short Take
FCT appears better positioned on its current leverage and suburban retail profile. The reduction in leverage following the White Sands divestment provides additional headroom, while the Johor Bahru – Singapore RTS commencing service in Feb 2027 remains a specific risk to watch.
Keppel DC benefits from its relatively low cost of debt, strong interest coverage and a high proportion of fixed-rate borrowings. Data centre demand, including those associated with artificial intelligence, provides a potential structural growth driver. However, the higher leverage following its Tokyo acquisition and the eventual returns from that investment warrant monitoring.
Suntec faces the greater balance-sheet challenge of the three. Its 43.0% leverage, shorter debt maturity and lower proportion of fixed-rate borrowings leave it more exposed to refinancing risks. The planned Australian asset divestments could help strengthen its balance sheet, but the eventual impact will depend on execution and how the proceeds are used.
For now, the numbers suggest that the three REITs remain operationally resilient, but their financial risks are not identical. As always, we would assess each on its own fundamentals and valuation, while keeping the REIT allocation within the portfolio's intended weighting. A rate hike is a reason to review, not necessarily a reason to panic.
Disclosure
The Bedokian is vested in FCT, Keppel DC and Suntec.
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References
Frasers Centrepoint Trust, Financial Results for the Second Half and Full Year ended 30 September 2026. 22 Oct 2026 - https://fct.frasersproperty.com/newsroom/20261022_071850_J69U_M4QRVBSKO5F899Z2.3.pdf
Keppel DC REIT. 3Q 2026 Operational Updates. 23 Oct 2026 - https://www.keppeldcreit.com/en/file/investor-relations/presentations/2026/kdcr-3q-2026-operational-updates.pdf
Suntec REIT Business Updates. For the Quarter ended 30 September 2026. 22 Oct 2026 - https://suntecreit.listedcompany.com/newsroom/20261022_195606_T82U_WQ6HKXQCSRQ75JKG.1.pdf
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