Keppel Bay Tower moves up in the world The article “Keppel announces divestment of data centre JV to Keppel DC REIT for $1.38 bil” was announced by Keppel on Nov 19. Keppel Data Centre (KDC), a joint venture owned by Keppel’s connectivity division and Cuscaden Peak Investments Private Limited, will be divested to Keppel DC REIT (KDC REIT) for $1.38 billion. The divestment includes the Keppel Data Centre Campus located at Genting Lane in Singapore, with two completed and fully contracted data centres known as KDC Singapore 7 (KDC SGP 7) and KDC Singapore 8 (KDC SGP 8). Both data centres are fully occupied by global hyperscalers from various industries such as cloud services, internet enterprises, and telecommunications on a colocation basis.
Financing for the two data centres was provided by Keppel DC, Keppel’s private fund Alpha Data Centre Fund (ADCF), and its parallel fund. KDC REIT, upon the completion of the transaction, will own 100% of KDC SGP 7 and KDC SGP 8, with Keppel remaining as the operator and facility manager.
KDC REIT will also acquire a 49% interest in the JV and subscribe for two new classes of securities worth $1.03 billion issued by the Keppel JV. With this, KDC REIT will receive 99.49% of the economic interest from both data centres. The REIT will also have a call option to acquire the remaining 51% stake from Keppel in the JV by the second half of 2025, which holds an economic interest of 0.51% in the data centres.
In addition, KDC REIT will pay an extra $350 million to the JV’s shareholders, ADCF and co-investors, if the campus receives approvals to extend its land tenure lease until 2050.
The acquisition is expected to increase KDC REIT’s distribution per unit (DPU) by 8.1%, and its assets under management (AUM) by 36% to $5.2 billion with 25 data centres across Asia Pacific and Europe.
Keppel’s share of the divestment totals $280 million, which is inclusive of the estimated consideration for its 51% stake in the JV if KDC REIT exercises the call option. It also includes an additional consideration for a 10-year land tenure lease extension for the campus if the call option is exercised. The gross divestment price will be adjusted for debt repayment and completion adjustments.
The JV has a vacant plot of land designated for a third data centre that is excluded from the transaction. Keppel intends to develop the third data centre, KDC SGP 9, with its two data centre private funds, Keppel DC Fund II and Keppel DC Fund III.
“The divestment of KDC SGP 7 and KDC SGP 8 to Keppel DC REIT demonstrates our ability to structure deals that bring significant value creation to the company, our private funds and REIT,” says Manjot Singh Mann, CEO of Keppel’s connectivity division. He believes that Keppel’s integrated ecosystem and strong customer relationships with global hyperscalers will enable the development of a robust pipeline of AI-ready data centres that are not only beneficial for customers but also provides attractive investments for its funds and REIT.
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The CEO of KDC REIT’s manager, Loh Hwee Long, notes that the REIT is “excited” to embark on the “landmark deal” as it celebrates its 10th anniversary. KDC REIT was first listed on the stock exchange in 2014.
“The proposed acquisition will deliver strong positive cash flows and be immediately DPU accretive. 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. Their inclusion further solidifies Keppel DC REIT’s market position as one of the largest owners of stabilised data centres in Singapore, where there is strong demand and tight supply,” adds Loh.
The proposed transaction will be executed in stages and is expected to be completed by the end of 2025.