Keppel DC REIT Unveils S\$404.5 Million Preferential Offering: Strategic Japan Data Centre Acquisition Poised to Boost DPU and Portfolio Strength

Key Highlights

• Keppel DC REIT is launching a fully underwritten, non-renounceable preferential offering of 180,562,518 new units to raise gross proceeds of S\$404.5 million.
• Issue price set at S\$2.24 per new unit, representing a 5.2% discount to the VWAP of S\$2.3622 on the signing day of the underwriting agreement.
• Allotment ratio: 80 new units for every 1,000 existing units held, fractions disregarded.
• Proceeds will be used to partially fund a transformative acquisition of a hyperscale data centre in Inzai City, Japan, asset enhancements, land lease extensions, and debt repayment.
• Estimated pro forma DPU accretion of 3.4% for FY2024 if all proceeds deployed as planned.
• Pro forma aggregate leverage expected to be maintained at a healthy 33.5%.
• Preferential offering is fully underwritten by DBS, OCBC, and UOB; major shareholders KDCIH and KDCRM have committed to subscribe their full entitlements.
• Units to be issued represent about 8% of current units in issue, potentially increasing trading liquidity.
• Timeline: Record Date is 30 September 2025, trading of new Units expected to commence on 22 October 2025.

In-depth Analysis for Investors

Strategic Rationale & Use of Proceeds

The S\$404.5 million raised will be deployed as follows:

• S\$229.8 million (56.8%) for the partial financing of a 98.47% effective interest acquisition in a hyperscale data centre located in Inzai City, Japan—a strategic move deepening Keppel DC REIT’s presence in Asia Pacific’s largest data centre hub (outside China).
• S\$53.9 million (13.3%) earmarked for asset enhancement initiatives (AEI) at Keppel DC Singapore 8.
• S\$10.7 million (2.7%) for costs associated with a 30-year land lease extension at Keppel DC Singapore 1.
• S\$104.5 million (25.8%) to repay debt (including that previously drawn for investments), strengthening the REIT’s balance sheet.
• S\$5.6 million (1.4%) to cover estimated fees and expenses related to the offering.
• Any remaining proceeds will be used for general corporate and/or working capital purposes.

Should the acquisition or AEI not proceed, net proceeds may be redirected at management’s discretion, including to repay existing debt or fund future acquisitions and capex.

Shareholder Impact & Price-Sensitive Information

• Preferential Offering Structure: The offering is non-renounceable, meaning provisional allotments cannot be traded or transferred. Shareholders can apply for excess units, but directors and substantial shareholders with board influence will rank last for odd-lot rounding and excess unit allocation.
• DPU Accretion: The acquisition is projected to be DPU-accretive, with an estimated 3.4% increase in distribution per unit for FY2024. This is a critical metric for income-focused investors and could positively influence unit price.
• Aggregate Leverage: Post-offering and deployment, pro forma leverage is expected to be at 33.5%, maintaining prudent financial flexibility and enabling future growth without overstretching the balance sheet.
• Liquidity and Market Presence: The issuance of approximately 180.6 million new units (about 8% of current units) is anticipated to enhance trading liquidity, which may attract institutional interest and improve price discovery.
• Major Shareholder Commitment: KDCIH (17.98% stake) and KDCRM (1.10% stake) have given irrevocable undertakings to subscribe fully to their entitlements, demonstrating confidence in the REIT’s strategy and providing reassurance to minority holders.
• Regulatory Approvals: In-principle approval for the listing of new units has been obtained from the SGX-ST, subject to compliance undertakings regarding use of proceeds and allocation of excess units.
• Eligibility Constraints: Only unitholders with Singapore addresses (or who provide them at least three market days before the record date) and qualified institutional buyers (QIBs) in certain jurisdictions are eligible; offering is not extended to the US, EEA, HK, UK (except eligible investors), Japan, Malaysia, or Australia.

Timeline & Key Dates

Historical Fund Raising Context

Keppel DC REIT raised S\$1,086.3 million in 2024 through private placement, a previous preferential offering, and a sponsor subscription. These proceeds have been fully utilised for acquisitions (Keppel DC Singapore 7 & 8), debt repayments, AEI, and working capital. The current offering further advances Keppel DC REIT’s strategy of portfolio expansion and financial optimisation.

Potential Implications for Unit Price

This capital raise signals management’s confidence in growth via high-quality acquisitions, particularly in Japan’s hyperscale data centre market—an increasingly valuable asset class. The anticipated DPU accretion, maintenance of leverage, and increased liquidity are all price-sensitive factors that could drive positive investor sentiment. However, dilution risk must be weighed against these benefits.

Investor Considerations

• Participation in the offering provides existing unitholders a direct opportunity to benefit from the REIT’s growth strategy.
• With major shareholders fully committed, minority investor interests are aligned with management’s vision.
• Strategic deployment of proceeds enhances portfolio resilience, diversification, and long-term value creation.
• Risks include the possibility of the acquisition or AEI not proceeding, in which case funds may be reallocated at management’s discretion.

Disclaimer

This article is for informational purposes only and does not constitute investment advice, solicitation, or an offer to buy or sell any security. Investors should assess their own financial circumstances and consult their professional advisers before making any investment decisions. The information herein is derived from the latest Keppel DC REIT announcement and may be subject to change. Neither the author nor the publisher guarantees the accuracy or completeness of the information. Past performance is not indicative of future results. The value of units and income may fluctuate, and investors may lose all or part of their capital.

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