Read also: Keppel Land China names Jeremiah Lee as new CEO On November 19, Keppel announced that it will be selling its data centre joint venture to Keppel DC REIT (KDC REIT) for a total price of $1.38 billion.
The joint venture, which is owned 60% by Keppel’s connectivity division and 40% by Cuscaden Peak Investments Private Limited, holds the Keppel Data Centre Campus located at Genting Lane in Singapore. The campus includes two fully operational data centres, Keppel DC Singapore 7 (KDC SGP 7) and Keppel DC Singapore 8 (KDC SGP 8), which are utilized by global hyperscalers from various industries such as cloud services, internet enterprise, and telecommunications.
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The construction of KDC SGP 7 and KDC SGP 8 was jointly funded by the JV, Keppel’s private fund Alpha Data Centre Fund, parallel fund (ADCF), and co-investors.
Upon the completion of the sale, KDC REIT will become the sole owner of KDC SGP 7 and KDC SGP 8. Keppel will continue to serve as the operator and facility manager for both data centres.
KDC REIT will gain a 49% ownership in the JV and will also subscribe to two new securities issued by Keppel JV for up to $1.03 billion. This will give the REIT a 99.49% economic interest in both data centres. KDC REIT will also have a call option to acquire the remaining 51% ownership from Keppel, which is expected to be exercised in the second half of 2025. The remaining 51% stake holds a 0.51% economic interest in the data centres.
KDC REIT will also pay an additional $350 million to the JV’s shareholders, including ADCF and co-investors, if the campus is granted a land lease extension until 2050.
This proposed acquisition is expected to increase KDC REIT’s distribution per unit (DPU) by 8.1%. It will also expand the REIT’s assets under management (AUM) by 36% to $5.2 billion, with a total of 25 data centres located in Asia Pacific and Europe.
Keppel will receive around $280 million from the divestment, which includes the estimated amount for Keppel’s 51% stake if the call option is exercised. It also includes additional consideration for the land lease extension. The total amount will be adjusted for debt repayment and completion adjustments.
The JV’s vacant land plot, which was originally planned for a third data centre, will not be included in the transaction, and will instead be sub-leased to Keppel’s private funds, Keppel DC Fund II and the upcoming Keppel DC Fund III. Keppel’s goal is to develop the third data centre, KDC SGP 9, with its two data centre private funds.
Manjot Singh Mann, CEO of Keppel’s connectivity division, says that this sale demonstrates the company’s ability to create value for its private funds and REIT. He adds that their integrated ecosystem provides access to vital resources, technology expertise, and strong customer relationships, which are essential for success in the data centre business. Keppel aims to continue developing a pipeline of AI-ready data centres that offer effective solutions for clients and attractive investments for their private funds and REIT.
Loh Hwee Long, CEO of KDC REIT’s manager, is excited about this landmark deal, which will occur during their 10th anniversary. He says that this acquisition will bring in strong cash flows and will immediately increase DPU. The inclusion of these assets will also improve the stability of their portfolio and allow them to capture potential upside from rental increases and capacity expansion. This transaction further cements Keppel DC REIT’s position as one of the largest owners of established data centres in Singapore, a market with high demand and limited supply.
The proposed transaction is expected to be completed in stages and finalized by the end of 2025.