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for $12.9 milThe proposed divestment of its data centre joint venture by Keppel is set to bring in 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, is responsible for managing the Keppel Data Centre Campus at Genting Lane in Singapore. With two fully operational data centres, KDC SGP 7 and KDC SGP 8, that are completely contracted to global hyperscalers on a colocation basis, the campus is a valuable asset with a strong income stream.
The development of KDC SGP 7 and KDC SGP 8 was financed by the JV, Keppel’s private fund Alpha Data Centre Fund and its parallel fund (ADCF), along with co-investors. However, Keppel has now agreed to divest its ownership stake in the JV to Keppel DC REIT (KDC REIT) for the total gross divestment price of $1.38 billion.
Following the acquisition, KDC REIT will have full ownership of KDC SGP 7 and KDC SGP 8. Keppel will continue to operate and manage the two data centres. As part of the deal, KDC REIT will acquire an initial 49% interest in the JV and invest up to $1.03 billion in two new classes of securities issued by the Keppel JV. This will entitle the REIT to 99.49% of the economic interest from both data centres. KDC REIT will also have a call option to purchase the remaining 51% stake from Keppel in the second half of 2025. This remaining stake holds an economic interest of 0.51% in the data centres.
Additionally, KDC REIT will pay an extra $350 million to the JV’s shareholders, ADCF and co-investors, if the campus receives approval for a 10-year land tenure lease extension until 2050.
The acquisition by KDC REIT is expected to have a positive impact on its distribution per unit (DPU) by 8.1%. It will also increase the REIT’s assets under management (AUM) by 36% to $5.2 billion with a portfolio of 25 data centres located across Asia Pacific and Europe.
Keppel will receive approximately $280 million from the divestment. The gross divestment price includes the estimated value of Keppel’s 51% stake in the JV if the call option is exercised, as well as the additional consideration for the campus’s potential 10-year land tenure lease extension if the call option is exercised. The gross divestment price will also be adjusted for debt repayment and completion adjustments.
The JV also owns a vacant plot of land that is meant for a third data centre, which is not part of the transaction. Keppel’s private funds, Keppel DC Fund II and the upcoming Keppel DC Fund III, will sublease the plot to develop the third data centre, KDC SGP 9, within the campus.
“The sale of KDC SGP 7 and KDC SGP 8 to Keppel DC REIT highlights our strength as a global asset manager and operator in structuring deals that offer attractive outcomes and value creation for Keppel, our private funds, and REIT,” says Manjot Singh Mann, CEO of Keppel’s connectivity division. He adds that the company’s integrated ecosystem provides access to essential resources, technology expertise, and strong customer relationships with hyperscalers worldwide, which are crucial for success in the data centre business. Keppel plans to use different sources of capital to develop a robust pipeline of AI-ready data centres that offer effective solutions for customers and attractive investments for its funds and REIT.
Loh Hwee Long, CEO of KDC REIT’s manager, expressed the REIT’s excitement about this landmark deal as it enters its 10th anniversary. KDC REIT first launched its initial public offering (IPO) in 2014. He adds that the proposed acquisition will provide strong positive cash flows and be immediately DPU accretive. He also added that the assets will improve the portfolio’s income resilience and allow the REIT to capture potential rental uplifts and expand its capacity. KDC REIT’s market position as one of the largest owners of stabilised data centres in Singapore will be further strengthened by the inclusion of these assets, where demand is high, and supply is limited.
The proposed transaction is expected to be completed by the end of 2025, subject to approval.