Keppel DC REIT’s Bold \$707 Million Tokyo Data Centre Acquisition: What Investors Need to Know

Game-changing Move Deepens Japan Presence, Triggers Significant Preferential Offering

Keppel DC REIT has announced a transformative acquisition that is poised to reshape its portfolio and potentially move share prices: the purchase of a near-full stake in a newly completed hyperscale data centre in Inzai City, Greater Tokyo. The move is accompanied by a fully underwritten preferential offering to raise approximately S\$404.5 million, designed to fund this acquisition and other value-adding initiatives.

Key Points of the Acquisition

• Property Details: Keppel DC REIT is acquiring a 98.47% effective interest in a five-storey hyperscale data centre, Tokyo Data Centre 3, for JPY 80.8 billion (~S\$696.1 million) out of a total purchase consideration of JPY 82.1 billion (~S\$707.0 million). The data centre is built to Tier III equivalent specifications, features the latest seismic standards with a base isolation structure, and is fully contracted to a Fortune Global 500 hyperscaler client for 15 years, with a renewal option of up to 5 years.
• Valuation: The independent valuation of the property stands at JPY 83.0 billion (~S\$714.7 million), suggesting a purchase below appraised value.
• Occupancy & Lease Terms: The entire net lettable area of ~74,465 sq ft is fully let, with annual built-in rent escalation, providing income visibility and a strong lease profile.
• Land Tenure: The asset sits on freehold land—rare in Japan’s data centre sector.

Strategic Rationale and Investment Merits

• Deepening Japanese Market Presence: Japan is the largest data centre hub in APAC (excluding China) and serves as a crucial interconnection gateway between Asia and the Americas via extensive subsea cables. Inzai, the location of the new asset, is among Japan’s most established data centre clusters, offering robust connectivity, low seismic risk, and supply constraints that underpin long-term demand.
• Immediate DPU Accretion: The acquisition is projected to be immediately accretive to Distribution Per Unit (DPU), with estimated FY2024 pro forma DPU accretion of +2.8%. When combined with other value creation initiatives, DPU accretion could reach +3.4%.
• Financial Health: Post-acquisition, aggregate leverage is estimated to be 34.5%, comfortably below the 40% threshold and leaving a debt headroom of approximately S\$559 million for further expansion. The use of JPY-denominated debt also provides a natural currency hedge, protecting against forex volatility.
• Portfolio Strengthening: The transaction will lift portfolio occupancy and income diversification, with the weighted average lease expiry (WALE) increasing and the proportion of income from top clients becoming more balanced. This enhances portfolio resilience and reduces concentration risk.

Financing Structure and Preferential Offering

• Funding Mix: The acquisition outlay (S\$708.3 million) will be financed by new JPY-denominated debt (~S\$473.6 million) and proceeds from a preferential offering (~S\$229.8 million), plus acquisition fees in units (~S\$4.9 million).
• Preferential Offering: The REIT will conduct a fully underwritten, pro rata, non-renounceable preferential offering to raise approximately S\$404.5 million. New units will be issued at S\$2.24 each—a ~5.2% discount to the recent VWAP—on the basis of 80 new units for every 1,000 existing units held.
• Use of Proceeds: About 56.8% of the funds will go towards the Tokyo Data Centre 3 acquisition, 13.3% for asset enhancement of Keppel DC Singapore 8, 2.7% for a 30-year land lease extension for Keppel DC Singapore 1, 25.8% for debt repayment, and 1.4% for fees and expenses.
• Sponsor Commitment: Keppel DC Investment Holdings and Keppel DC REIT Management have given irrevocable undertakings to subscribe for their entire entitlements, reflecting strong sponsor support and alignment with unitholders’ interests.

Timeline and Important Dates

• Last cum-Preferential Offering date: 26 September 2025
• Record date for eligibility: 30 September 2025 (5:00 p.m.)
• Offer opens: 3 October 2025 (9:00 a.m.)
• Offer closes: 13 October 2025 (5:30 p.m.)
• Listing and trading of new units: 22 October 2025 (9:00 a.m.)

Why This News Is Price Sensitive

• Significant Portfolio Expansion: This acquisition is one of the largest for Keppel DC REIT and marks a considerable expansion in the high-growth Japanese data centre market. The accretive nature of the acquisition, both in terms of DPU and portfolio stability, is likely to be viewed positively by investors.
• Equity Dilution and Funding: The preferential offering will result in the issuance of new units (~8% increase in total units), potentially diluting existing unitholders who do not participate. The issue price represents a notable discount to the current trading level, which could temporarily pressure the share price.
• Long-Term Strategic Value: The freehold nature of the asset, long lease to a top-tier global hyperscaler, and strong sponsor support collectively position the REIT for sustainable growth and resilience in distributions.
• Macro Tailwinds: Rising demand for data centre space, especially from cloud adoption, data onshoring, and AI deployments, as well as supply constraints in Japan, provide a strong secular growth backdrop.

Conclusion

Keppel DC REIT’s acquisition of Tokyo Data Centre 3 is a bold, strategically sound move that aligns with its long-term value creation ambitions. While the preferential offering introduces short-term dilution risk, the accretive nature of the deal, enhanced portfolio resilience, and strong sponsor commitment signal continued growth and confidence in the REIT’s future. Investors should closely monitor the preferential offering timeline and consider participating to avoid dilution and benefit from the REIT’s expanded growth prospects.

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 due diligence and consult their own financial advisers before making any investment decision. The value of investments can fall as well as rise, and past performance is not indicative of future results.

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