Keppel DC REIT Takes Full Control of Two Prime Singapore Data Centres in S\$8.4 Million Deal: What Investors Must Know

Key Highlights of the Acquisition

• Keppel DC REIT now owns 100% of Keppel DC Singapore 7 and 8: The REIT has acquired the remaining 51% interest in the holding company (Memphis 1) for these properties from Keppel Griffin, a subsidiary of its Sponsor.
• Transaction Structure: The acquisition was executed through a Call Option, as outlined in an earlier Master Agreement. The purchase price is up to S\$8.4 million, subject to adjustments and an additional contingent payment if a major lease extension is secured.
• Property Valuation: The combined market value of the two data centres was independently assessed at an average of S\$1,055.5 million, reflecting the quality and strategic importance of these assets.
• Funding: The acquisition will be financed by debt and/or internal cash resources, with no material impact expected on Keppel DC REIT’s net asset value (NAV) or distribution per unit (DPU) for FY2025.
• Regulatory Classification: The deal is categorized as a “non-discloseable transaction” under SGX rules, with all related party transactions with the Sponsor group for the year well below the 3% threshold for mandatory disclosure.

Detailed Breakdown of the Transaction

Keppel DC REIT Management announced that its trustee, Perpetual (Asia) Limited (acting for a wholly owned sub-trust), has exercised its Call Option to acquire the remaining 51% of Memphis 1 from Keppel Griffin. This move consolidates full ownership of two prime Singapore data centres—Keppel DC Singapore 7 and 8—under Keppel DC REIT.

The acquisition price consists of:

• Approximately S\$6.6 million (subject to completion adjustments), which includes 51% of the adjusted net asset value of Memphis 1 and repayment of outstanding notes held by Keppel Griffin, including accrued interest.
• An additional contingent payment of up to S\$1.8 million may be made if a 10-year lease extension for the properties is successfully secured.

Valuations were provided by two independent firms: Knight Frank (S\$1,047.0 million) and Savills (S\$1,064.0 million), with an average of S\$1,055.5 million. However, the agreed property price for the acquisition was set at S\$1,046.3 million, in line with the terms of the Master Agreement, which stipulates the lower of the average market value or a pre-agreed amount plus land premium.

Key Considerations for Shareholders

• Full Ownership of Prime Assets: This acquisition gives Keppel DC REIT complete control over two highly strategic data centre assets in Singapore, enhancing its long-term growth prospects and operational flexibility.
• Minimal Immediate Financial Impact: The Manager has stated that the acquisition will not materially affect the REIT’s NAV or DPU for 2025, alleviating concerns about near-term dilution or increased leverage.
• Potential Upside from Lease Extension: If a 10-year lease extension is secured, there will be an additional S\$1.8 million payment, indicating possible upside for the properties’ income streams and valuation.
• Low Related Party Transaction Risk: The total value of interested person transactions with the Sponsor group (including this deal) is only 0.5% of the REIT’s net tangible assets, well below regulatory thresholds, suggesting sound governance and low risk of overpaying related parties.
• Market Sensitivity: The consolidation of full ownership of these data centres could be seen as a strategic positive—potentially making the REIT more attractive to long-term investors seeking stable, high-quality assets in Singapore’s fast-growing data centre market.

Conclusion: Why This News Matters

Keppel DC REIT’s completion of this acquisition signals a strategic move to solidify its position as a leading data centre REIT in Asia. With full ownership of two major Singapore assets and prudent financial management, the REIT is well-positioned to capitalize on future data centre demand. Retail investors should monitor the REIT for further updates, especially regarding potential lease extensions, which could enhance earnings visibility.

Disclaimer

This article is for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. Investors should conduct their own research or consult a qualified financial advisor before making investment decisions. Past performance is not indicative of future results. The value of investments can go down as well as up, and investors may not get back the amount they invested.

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