Keppel DC REIT Acquires Tokyo Data Centre 3 in Inzai, Japan and Launches Preferential Offering to Fund Growth

Keppel DC REIT’s Bold Tokyo Expansion: Major Acquisition, DPU Accretion, and S\$404.5m Preferential Offering Set to Reshape Portfolio

Key Highlights for Investors

Keppel DC REIT announces the acquisition of a newly completed hyperscale data centre in Inzai City, Greater Tokyo, Japan for JPY 80.8 billion (~S\$696.1 million) for a 98.47% effective interest.
Acquisition is immediately accretive to Distribution Per Unit (DPU), with pro forma DPU accretion of up to 2.8%.
Fully underwritten, pro-rata, non-renounceable Preferential Offering to raise approximately S\$404.5 million.
Strategic use of JPY-denominated debt creates a natural hedge, reducing forex risks.
Portfolio enhancement: Occupancy, lease expiry profile, and income diversification all improve post-acquisition.
Balance sheet remains healthy, aggregate leverage expected to remain below 40%.

Acquisition Overview: Tokyo Data Centre 3

Keppel DC REIT has announced the acquisition of a 98.47% effective interest in a newly completed five-storey hyperscale data centre in Inzai City, Greater Tokyo, Japan, for JPY 80.8 billion (~S\$696.1 million). The data centre, completed in 2025, is built to Tier III equivalent specifications and features the latest seismic standards with a base isolation structure, enhancing resilience in one of the world’s most earthquake-prone regions.

The asset is fully let to a Fortune Global 500 hyperscaler under a 15-year contract with an option to renew for up to five years, providing long-term income visibility. The underlying land title is freehold, and the property boasts a net lettable area of approximately 74,465 sq ft, with 100% occupancy upon completion, expected by the end of 2025.

The independent valuation of the property stands at JPY 83.0 billion (~S\$714.7 million), suggesting the acquisition is being made at a slight discount to appraised value.

Strategic and Financial Rationale

1. Strategic Addition to Portfolio

The acquisition deepens Keppel DC REIT’s presence in Japan, the largest data centre hub in Asia Pacific (excluding China).
The data centre is located in Inzai, one of the most established and connected data centre clusters in Japan, offering robust low-latency access to Central Tokyo.
The asset is managed by an established global third-party operator with over 20 years of experience in Japan.
The lease includes annual rent escalation, ensuring built-in growth.

2. Riding on Sector Tailwinds

Japan’s data centre market is benefiting from strong demand drivers—cloud adoption, data onshoring, and artificial intelligence deployments—while facing supply constraints such as limited power allocation and construction bottlenecks.
Inzai’s reputation as a strategic hub, with low seismic risk and robust connectivity, makes this acquisition especially attractive.

3. DPU Accretive While Maintaining Financial Flexibility

The acquisition is immediately DPU accretive, with a pro forma DPU uplift of 2.8% for FY2024.
Aggregate leverage is expected to increase modestly to 34.5% (up from 33.0%), remaining well below the 40% threshold, with significant debt headroom (~S\$559 million).
Portfolio occupancy rises slightly to 95.9%, and rental income from the top client drops to 45.3%, increasing income diversification and risk resilience.
Weighted Average Lease Expiry (WALE) is extended, strengthening lease profile.

Method of Financing: Conservative and Strategic

The total acquisition outlay, including transaction costs and acquisition fees in units, is approximately S\$708.3 million. Keppel DC REIT will utilize a mix of new JPY-denominated debt (~S\$473.6 million) and proceeds from the Preferential Offering (~S\$229.8 million) to finance the acquisition. Strategic use of JPY-denominated debt provides a natural currency hedge against the asset’s cash flows, minimizing FX volatility risks.

Preferential Offering: S\$404.5 Million Equity Raise

The Preferential Offering will raise approximately S\$404.5 million through a fully underwritten, pro-rata, non-renounceable issue of 80 new units for every 1,000 existing units at an issue price of S\$2.24 per unit—a discount of about 5.2% to the last traded VWAP.
Keppel, as sponsor, has committed to subscribe for its full entitlement (~19.1% of the issue), demonstrating strong alignment with unitholders and confidence in the REIT’s prospects.
Use of proceeds: S\$229.8 million to partially fund the Tokyo acquisition, S\$53.9 million for asset enhancement at Keppel DC Singapore 8, S\$10.7 million for a 30-year land lease extension at Keppel DC Singapore 1, S\$104.5 million for debt repayment, and S\$5.6 million for estimated fees and expenses.
The offering will strengthen the balance sheet, with pro forma aggregate leverage expected to fall further to 33.5% post-raising.
Pro forma DPU accretion, including value creation initiatives, is estimated at +3.4%.
Timetable: Units trade ex-offer from 29 September 2025; record date is 30 September; subscription opens 3 October and closes 13 October; new units commence trading on 22 October 2025.

Potentially Price-Sensitive Considerations for Shareholders

This is a major expansion into Japan and marks a significant increase in portfolio scale and sector exposure, which could drive earnings growth and DPU accretion.
The funding structure, involving both debt and equity, is designed to keep leverage low and balance sheet resilient—an important factor for REIT investors amid rising interest rates and sector volatility.
Preferential offering at a discount and strong sponsor support may be seen as positive signals, but will result in dilution for non-participating unitholders.
The acquisition’s success hinges on the performance of the Japanese hyperscale tenant and continued sector demand, but the long WALE and strong client provide downside protection.
Forward-looking statements in the report suggest confidence in continued growth, but also note the usual risks (macroeconomic, FX, sector competition, etc.) associated with large cross-border transactions.

Portfolio Impact and Growth Prospects

Post-acquisition, Keppel DC REIT will own 25 data centres across 10 countries, with assets under management (AUM) of approximately S\$5.7 billion. Asia Pacific will comprise over 83% of AUM, further solidifying the REIT’s leading market position in the region’s digital infrastructure sector.

The enhanced scale, improved income diversity, and strategic asset positioning provide Keppel DC REIT with greater financial flexibility and capacity to pursue future growth.

Conclusion

This announcement is a major catalyst for Keppel DC REIT, with the potential to re-rate the share price on the back of immediate DPU accretion, a stronger portfolio, and a well-supported equity fundraising. Investors should carefully consider participation in the Preferential Offering and monitor execution risks. The long-term fundamentals of the Asia Pacific data centre market, combined with prudent capital management, position Keppel DC REIT for sustained growth.

Disclaimer

This article is for informational purposes only and does not constitute investment advice. Investors should do their own research or consult a professional adviser before making investment decisions. The information is based on publicly available reports and may contain forward-looking statements subject to risks and uncertainties. Past performance is not indicative of future results.