Keppel DC REIT to Divest S\$79.2 Million in NetCo Bonds and Preference Shares: Strategic Shift Towards Data Centre Growth

Key Highlights from the Announcement

• Keppel DC REIT to sell its entire interest in NetCo Bonds and Preference Shares for approximately S\$79.2 million.
• The transaction supports the REIT’s refocus on core data centre assets and future growth in the hyperscale segment.
• Proceeds will be utilised for acquisitions, asset enhancements, and debt reduction, creating headroom for new investments.
• The deal is not expected to have a material impact on Keppel DC REIT’s net asset value or distribution per unit for FY2025.
• Completion is subject to regulatory approvals, notably from the Infocomm Media Development Authority.

Full Details of the Proposed Transaction

Keppel DC REIT Management Pte. Ltd., as the manager of Keppel DC REIT, has announced a major strategic move: the sale of 100% of its NetCo Bonds and NetCo Preference Shares to an unrelated Singapore-based private holding company. The Sale and Purchase Agreement was signed on 11 August 2025.

Background on the Investment

In December 2021, Keppel DC REIT subscribed to NetCo Bonds worth S\$88.7 million, entitling the REIT to receive S\$11.0 million annually (comprising both principal and interest) for 15 years. To provide additional security for this investment, Keppel DC REIT also subscribed to all of NetCo’s preference shares (worth S\$1.0 million), which granted it 50% representation on NetCo’s board.

NetCo, a subsidiary of M1, owns critical mobile, fixed, and fibre network assets and has a network services agreement with M1 and its mobile virtual network operators.

Transaction Structure and Financials

Under the agreement, Keppel DC REIT will sell all NetCo Bonds and NetCo Preference Shares. The payment from the purchaser will be based on the principal amount outstanding at the time of completion, including accrued interest and the principal value of the preference shares. If the deal were to close on the announcement date, Keppel DC REIT would receive approximately S\$79.2 million—comprising S\$77.2 million in NetCo Bonds principal, S\$1.0 million in accrued interest, and S\$1.0 million for the preference shares.

Completion of the sale is contingent on several conditions, most importantly regulatory clearance from Singapore’s Infocomm Media Development Authority.

Rationale Behind the Sale

The REIT manager states that this divestment is a deliberate step to realign its portfolio towards data centre assets—a sector experiencing robust growth, especially in the hyperscale segment. The proceeds from this sale are earmarked for future acquisitions, asset enhancement projects, and to pare down borrowings. This prudent rebalancing is intended to position Keppel DC REIT for long-term sustainable growth and to create additional financial flexibility.

Shareholder Implications and Potential Share Price Impact

• This transaction signals a clear pivot towards Keppel DC REIT’s core competency in data centres, which could be positively received by investors seeking focused exposure to the fast-growing digital infrastructure sector.
• The sale is not expected to materially impact the REIT’s net asset value or distribution per unit for the financial year ending 31 December 2025, meaning no immediate dilution or enhancement of shareholder value is anticipated.
• By creating debt headroom and freeing up capital for growth, the move could strengthen the REIT’s balance sheet and acquisition capacity, potentially supporting future distribution growth.
• Investors should note that the deal is subject to regulatory approval, and any delays or issues may affect the timing or completion of the transaction.
• On the downside, divesting a stable, long-term income stream from the bonds may raise questions about future income stability, depending on how quickly and effectively the proceeds are redeployed.

Other Important Information

According to the Singapore Exchange’s Listing Manual, the sale is classified as a “non-discloseable transaction,” indicating that it falls below thresholds that require more extensive disclosure. Nonetheless, given its implications for strategic direction and balance sheet strength, investors are advised to monitor future announcements regarding the redeployment of proceeds.

Forward-Looking Considerations

The announcement includes standard cautionary statements about forward-looking information. Market conditions, interest rates, competition, and regulatory changes could all impact the REIT’s performance and the outcome of this transaction.

Conclusion

Keppel DC REIT’s move to sell its NetCo Bonds and Preference Shares marks a decisive shift towards building a pure-play data centre portfolio. While the immediate financial impact may be neutral, the long-term implications could be significant, especially if the REIT seizes new opportunities in the high-growth hyperscale data centre market.

Disclaimer: This article is for informational purposes only and does not constitute investment advice or an offer to buy or sell any securities. Investors should conduct their own due diligence or consult a professional adviser before making any investment decisions. The views expressed are based on the company’s announcement and may be subject to change. Past performance is not indicative of future results. Investment in REITs is subject to risks, including possible loss of principal.

View Keppel DC Reit Historical chart here