Keppel Divest Genting Lane Data Centres Kdc Reit 138 Bil
Keppel Corporation, on November 19, announced its plans to sell its data centre joint venture (JV) to Keppel DC REIT (KDC REIT) for a total gross divestment price of $1.38 billion. This JV is 60% owned by Keppel’s connectivity division and 40% owned by Cuscaden Peak Investments Private Limited, and they jointly own the Keppel Data Centre Campus at Genting Lane in Singapore. This campus currently houses two fully contracted and completed data centres, namely Keppel DC Singapore 7 (KDC SGP 7) and Keppel DC Singapore 8 (KDC SGP 8). These data centres are fully contracted to global hyperscalers from the cloud services, internet enterprise, and telecommunications sectors and operate on a colocation basis.
The construction of KDC SGP 7 and KDC SGP 8 was funded by the JV, Keppel’s private fund Alpha Data Centre Fund, its parallel fund, and co-investors.
Upon the completion of the proposed transaction, KDC REIT will hold full ownership of KDC SGP 7 and KDC SGP 8. Keppel will continue to serve as the operator and facility manager for these two data centres. KDC REIT will acquire an initial 49% interest in the JV and subscribe for two new classes of securities issued by the Keppel JV for up to $1.03 billion, granting the REIT 99.49% of the economic interest in both data centres. KDC REIT will also be granted a call option, expected to be exercised by the end of 2025, to acquire the remaining 51% stake in the Keppel JV from Keppel, which holds 0.51% of the economic interest in the data centres.
As part of the proposed transaction, KDC REIT will pay an additional $350 million to the JV’s shareholders, ADCF and co-investors, if the campus receives approvals to extend its land tenure lease to 2050.
If the proposed acquisition is completed, KDC REIT’s distribution per unit (DPU) is expected to increase by 8.1%, and the REIT’s assets under management (AUM) will expand by 36% to $5.2 billion, with 25 data centres across Asia Pacific and Europe.
Keppel’s share of the divestment is estimated to be around $280 million and includes the consideration for their 51% stake in the JV if the call option is exercised, as well as the additional consideration for the land tenure lease extension. The gross divestment price will be adjusted for debt repayment and completion adjustments.
The JV also has a vacant land plot earmarked for a third data centre, which will not be part of the proposed transaction. This plot will be sub-leased to Keppel’s private funds, Keppel DC Fund II and the upcoming Keppel DC Fund III, for the development of the third data centre in the campus, KDC SGP 9.
“The injection of KDC SGP 7 and KDC SGP 8 into Keppel DC REIT underscores our strengths as a global asset manager and operator to structure deals with compelling outcomes and strong value creation for the company, our private funds, and REIT,” says Manjot Singh Mann, CEO of Keppel’s connectivity division. He added that Keppel’s integrated ecosystem provides access to power and other critical resources, technology know-how, and strong customer relationships with hyperscalers worldwide, making it a crucial element for success in the data centre business. With the ability to invest with multiple pools of capital, Keppel is well-positioned to develop a robust pipeline of AI-ready data centres that can offer effective solutions for customers and serve as attractive investments for its funds and REIT.
Loh Hwee Long, CEO of KDC REIT’s manager, stated that the REIT is “excited” to embark on this “landmark deal” on its 10th anniversary. In 2014, the REIT launched its initial public offering (IPO). He added that the proposed acquisition will deliver strong positive cash flows and immediately increase the DPU. The inclusion of these assets will not only improve the portfolio’s income resilience but also provide potential upside from rental uplifts and capacity expansion. He also mentioned that the inclusion of these assets will reinforce Keppel DC REIT’s position as one of the largest owners of stabilised data centres in Singapore, with strong demand and limited supply.
The proposed transaction will be executed in stages and is expected to be completed by the end of 2025.
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