‘s main structure to push sales timing
On November 19, Keppel announced the divestment of its data centre joint venture (JV) to Keppel DC REIT (KDC REIT) for a total gross divestment price of $1.38 billion. The JV, which is owned 60% by Keppel’s connectivity division and 40% by Cuscaden Peak Investments Private Limited, owns the Keppel Data Centre Campus situated at Genting Lane in Singapore. The campus comprises two fully contracted and completed data centres, namely Keppel DC Singapore 7 (KDC SGP 7) and Keppel DC Singapore 8 (KDC SGP 8). Both data centres are fully contracted to global hyperscalers from various sectors, including cloud services, internet enterprises, and telecommunications, on a colocation basis. The JV, together with Keppel’s private fund Alpha Data Centre Fund, its parallel fund (ADCF), and co-investors, funded the construction of both data centres.
Rewritten:
Investing in a condo has multiple advantages, including the opportunity to leverage the property’s value for other investments. It is common for investors to use their condos as collateral in order to secure additional financing for new ventures, which can lead to the growth of their real estate portfolio. While this approach can potentially increase profits, it also carries some risks. It is important to have a well-thought-out financial plan and to carefully assess the potential effects of market fluctuations. Additionally, keeping an eye on New Condo Launches can provide opportunities for further investment.
After the proposed transaction is completed, KDC REIT will become the sole owner of KDC SGP 7 and KDC SGP 8. Keppel will continue to operate and manage the two data centres. KDC REIT will acquire an initial 49% interest in the JV and subscribe to two new classes of securities issued by the Keppel JV for up to $1.03 billion. This will give the REIT 99.49% of the economic interest in both data centres. KDC REIT will also have a call option, which it plans to exercise in the second half of 2025, to acquire the remaining 51% stake in the Keppel JV from Keppel. This remaining stake has an economic interest of 0.51% in the data centres. As part of the proposed transaction, KDC REIT will pay an additional $350 million to the JV’s shareholders, ADCF and co-investors, if the campus is granted an extension of its land tenure lease to 2050.
The proposed acquisition by KDC REIT is expected to increase its distribution per unit (DPU) by 8.1%. Additionally, it will expand the REIT’s assets under management (AUM) by 36%, reaching $5.2 billion with a total of 25 data centres across Asia Pacific and Europe. Keppel will receive around $280 million from the divestment. The gross divestment price encompasses the estimated consideration for Keppel’s 51% stake in the JV if the call option is exercised, as well as additional consideration for the extension of the campus’s land tenure lease for 10 years, assuming the call option is exercised. The gross divestment price will also be adjusted for debt repayment and completion adjustments.
The JV also possesses a vacant plot of land intended for a third data centre, which is not part of the transaction. The plot will be leased to Keppel’s private funds, Keppel DC Fund II and the upcoming Keppel DC Fund III. Keppel intends to develop the third data centre, KDC SGP 9, with the two data centre private funds.
Manjot Singh Mann, CEO of Keppel’s connectivity division, says that the injection of KDC SGP 7 and KDC SGP 8 into Keppel DC REIT showcases their ability to structure deals that offer strong value creation for the company, its private funds, and the REIT. He adds that their integrated ecosystem provides access to essential resources like power, technology expertise, and customer relationships with hyperscalers worldwide, which are crucial to success in the data centre business. The company can work with multiple pools of capital to create a strong pipeline of AI-ready data centres that provide effective solutions for customers while offering attractive investments for their funds and REIT.
Loh Hwee Long, CEO of KDC REIT’s manager, says that the REIT is thrilled to embark on this landmark deal on its 10th anniversary. KDC REIT launched its initial public offering (IPO) in 2014. He adds that the transaction will provide substantial positive cash flows and immediately increase DPU. The inclusion of these assets will not only enhance the portfolio’s income resilience but also allow them to benefit from potential rental uplifts and capacity expansion. This transaction further solidifies Keppel DC REIT’s position in the market as one of the largest owners of stabilized data centres in Singapore, where there is a strong demand and limited supply.
The proposed transaction will be executed in stages and is expected to be completed by the end of 2025.