SETAPAK: KIP Real Estate Investment Trust (KIP REIT) is targeting higher distribution per unit (DPU) in FY27 after completing its RM435 million acquisition of Setapak Central Mall, with gearing rising to about 41% following the deal.
KIP REIT CEO Valerie Ong Pui Shan said higher DPU would remain a key performance indicator for the financial year, although the trust has yet to disclose the acquisition’s incremental contribution to DPU.
“We want to make sure that our DPU is higher. That is one of our key performance indicators for this financial year,” she told reporters at the unveiling of KIPMall Setapak yesterday.
The acquisition, which marks KIP REIT’s entry into Kuala Lumpur, has lifted its assets under management (AUM) to about RM2.2 billion, surpassing its RM2 billion target for 2027 ahead of schedule.
The Setapak property is also the REIT’s 20th income-producing asset.
Ong said the trust’s gearing is now hovering at about 41%, leaving room for further balance sheet utilisation as it considers future growth opportunities.
The increase in gearing follows the acquisition of the three-storey Setapak mall for RM435 million, which was funded through a combination of bank borrowings and proceeds from a private placement.
KIP REIT completed the placement of 200 million new units in August at RM0.815 per unit, raising about RM163 million. The proceeds contributed RM161.6 million towards the acquisition funding.
The latest financing also includes a RM175 million Class A medium-term note (MTN), secured against Setapak Central Mall, KIPMall Desa Coalfields and Lotus’s Indera Mahkota, with proceeds partly used to finance the Setapak acquisition.
The acquisition brings approximately 514,777 sq ft of net lettable area (NLA) into the portfolio, lifting KIP REIT’s total NLA to about 3.8 million sq ft, or an increase of roughly 16%.
Setapak Central recorded an occupancy rate of 99.9% as at Feb 28, 2026, and generated RM31.3 million in net property income (NPI) in 2025. Based on the RM435 million purchase consideration, this translates into an implied property yield of 7.2%.
Income from the property will be recognised from Q2’27.
Ong said the trust was focused on ensuring the newly acquired asset contributes positively to the portfolio while continuing to improve the performance of its existing malls.
“We have more than 1,300 tenants across our portfolio. With Setapak, it is about 1,500 tenants, so there are opportunities for cross-selling and up-selling across the portfolio,” she said.
The Setapak acquisition also gives KIP REIT greater exposure to a mature urban catchment comprising young families, students and residents in surrounding residential and commercial developments.
The acquisition comes after KIP REIT delivered its strongest annual distribution since its listing.
For FY26, its gross revenue increased 30.1% to RM177.1 million, while NPI rose 34.1% to RM129.9 million. Income available for distribution grew 41.4% to RM74.5 million, enabling the REIT to declare a record DPU of 7.26 sen, compared with 6.80 sen in FY25. The REIT reported a FY26 distribution yield of 8.6%.
The stronger FY26 performance was driven by higher contributions from its existing retail portfolio and newly acquired assets.
Retail assets accounted for the bulk of KIP REIT’s portfolio, reflecting its continued focus on neighbourhood and community-centric malls.
Ong said the trust intends to sustain the momentum in DPU while continuing to strengthen the portfolio through asset enhancement initiatives (AEIs), tenant remixing and operational improvements.
