Keppel JV Selling Two Singapore Data Centres to Keppel DC REIT for $1B

Keppel DC Singapore 7 at the Keppel Data Centre Campus in Geylang (Image: Keppel)

A joint venture led by Keppel Ltd has agreed to sell two Singapore data centres to SGX-listed Keppel DC REIT for S$1.38 billion ($1 billion) in one of Southeast Asia’s biggest transactions in the asset class.

The deal includes two completed hyperscale facilities, Keppel DC Singapore 7 and Keppel DC Singapore 8, within the Keppel Data Centre Campus in the city-state’s Geylang area, Keppel said Tuesday in a release. A vacant plot earmarked for a third data centre has been carved out from the proposed transaction, according to the Temasek Holdings-backed conglomerate.

The JV is a 60:40 partnership of Keppel’s connectivity division and Cuscaden Peak, the latter being a consortium of hotel tycoon Ong Beng Seng, his SGX-listed Hotel Properties and Temasek-backed CapitaLand and Mapletree. The construction of KDC SGP 7 and KDC SGP 8 was funded by the JV, Keppel’s private Alpha Data Centre Fund and co-investors.

“The injection of KDC SGP 7 and KDC SGP 8 into Keppel DC REIT underscores our strengths as a global asset manager and operator to structure deals with compelling outcomes and strong value creation for the company, our private funds and REIT,” said Manjot Singh Mann, CEO of Keppel’s connectivity division.

Staged Transaction
The S$1.38 billion transaction is to be executed in stages and completed by the end of 2025, Keppel said. Keppel DC REIT will acquire an initial 49 percent interest in the JV and subscribe for two new classes of securities issued by the JV for up to S$1.03 billion, entitling the trust to 99.49 percent of the economic interest from KDC SGP 7 and KDC SGP 8.

Manjot Singh Mann, CEO of Keppel’s connectivity division

The REIT will also be granted a call option, which it expects to exercise in the second half of 2025, to acquire the remaining 51 percent stake in the JV from Keppel, which holds the remaining 0.51 percent economic interest.

As part of the deal, Keppel DC REIT will pay an additional S$350 million to the JV’s shareholders, the Alpha Data Centre Fund and co-investors, should a 10-year land lease extension to 2050 be approved for the Keppel Data Centre Campus by the relevant authorities.

KDC SGP 7 and KDC SGP 8 are carrier-neutral data centres with a combined net lettable area of 150,455 square feet (13,978 square metres) and a weighted average lease expiry by NLA of 4.5 years. Acquiring the two facilities will expand Keppel DC REIT’s assets under management by 36 percent to S$5.2 billion ($3.9 billion) with 25 data centres across Asia Pacific and Europe.

“The proposed acquisition will deliver strong positive cash flows and be immediately DPU accretive,” said Loh Hwee Long, CEO of the REIT’s manager. “These assets will not only enhance our portfolio’s income resilience but also allow us to capture potential upside from rental uplifts and capacity expansion.”

The properties will add to Keppel DC REIT’s existing portfolio of six data centres in Singapore, which ranks fifth among Asia Pacific markets after mainland China, Japan, India and Australia in terms of operational capacity with 985 megawatts of facilities online, according to a recent report by Cushman & Wakefield.

Equity Fundraising Launch
The manager on Tuesday announced a plan to raise nearly S$1 billion in equity to provide Keppel DC REIT with “greater financial capacity to capitalise on and pursue further growth opportunities, including acquisitions of income-producing data centres”.

The newly issued units will increase the number of units in issue by 466.9 million, representing an increase of 27.1 percent of the total number of units currently in issue, the manager said in a release.

The gross proceeds of S$985 million will include a private placement of S$600 million, a preferential offering to entitled unitholders of S$300 million and a subscription issuance of new units in the amount of S$85 million.

“The increase in the total number of units in issue and enlarged unitholder base is expected to enhance the free float and trading liquidity of the units and raise the profile of Keppel DC REIT among investors,” the manager said.