UPDATE: Keppel DC REIT to acquire two Singapore data centers for around S$585 million

Singapore 50 dollar bill

This article was originally published on Monday, 16 September 2019 at 8:26 A.M. SGT; it has since been updated with more details.

Keppel DC REIT entered deals to acquire two data centers in Singapore, one partly owned by Keppel Infrastructure Trust and the other partly owned by Keppel Data Centres Holdings, for a total of around S$585.1 million, the companies said in filings to SGX Monday.

“Singapore is amongst the world’s fastest-growing data center markets, driven by demand from internet enterprises as well as the IT services, telecommunications and financial services sectors,” Chua Hsien Yang, CEO of Keppel DC REIT’s manager, said in the statement. “The strategic acquisitions of these two quality data centers will strengthen Keppel DC REIT’s foothold in this robust market.”

The REIT plans to acquire 99 percent of Keppel DC Singapore 4 (KDC SGP 4) for around S$384.8 million, with the remainder to be acquired by an entity of Keppel Data Centres Holding (KDCH), the filings said. The total acquisition cost, including acquisition fee to the REIT manager and stamp duties, was estimated at S$392.3 million, the REIT said.

The seller of KDC SGP 4 is Thorium DC, a 70:30 joint venture of Alpha Data Centre Fund, which is managed by Alpha Investment Partners, and KDCH, the filing said. KDCH is also a joint venture, and it is 70 percent held by Keppel Telecommunications & Transportation, with the remainder held by Keppel Land, both of which are owned by Keppel Corp.

In addition, the REIT said it plans to acquire 1-Net North Data Centre for S$200.2 million from Keppel Infrastructure Trust’s wholly owned subsidiary, which holds a 51 percent stake, and Shimizu Corp.’s wholly owned subsidiary, which holds the remainder, the REIT said.

The total acquisition cost, including acquisition fee to the REIT manager and stamp duties, was estimated at S$207.2 million, the REIT said.

Matthew Pollard, the CEO of Keppel Infrastructure Trust’s trustee-manager, said the divestment would allow the trust to realize the remaining lease value upfront. KIT plans to use the proceeds for acquisitions, repaying the loans on the data center, refinancing purposes and working capital, Pollard said. The estimated net proceeds for KIT would be S$51.3 million, the trust said.

The acquisitions will be funded by a combination of a private placement, a preferential offering and debt, Keppel DC REIT said, adding the deals were expected to be “highly accretive” to its distribution per unit (DPU).

On a pro forma basis, assuming the acquisitions were completed at the start of 2018, the DPU would have been 9.4 percent to 12.4 percent higher, depending on tax methodology, the REIT estimated.

Both acquisitions are expected to be completed in the fourth quarter of this year, Keppel DC REIT said.

KDC SGP 4, a five-storey carrier neutral facility, is 92 percent occupied and located nearby two of the REIT’s existing data centers, the REIT said.

1-Net North DC is a five-storey purpose-built facility with on a triple-net master lease with 17 years remaining and an option to renew for 7.6 years, the filing said.

After the acquisitions, Keppel DC REIT’s portfolio will have 17 data centers and its assets under management will rise 30.7 percent to S$2.58 billion, the REIT said.

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