showflat divestment
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On November 19, Keppel announced that it will be selling its data centre joint venture to Keppel DC REIT for a total price of $1.38 billion. The JV, in which Keppel’s connectivity division owns 60% and Cuscaden Peak Investments Private Limited owns 40%, owns the Keppel Data Centre Campus at Genting Lane in Singapore. This campus includes two completed and fully contracted data centres, namely Keppel DC Singapore 7 (KDC SGP 7) and Keppel DC Singapore 8 (KDC SGP 8), which are both fully contracted to global internet companies 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 and its parallel fund (ADCF), as well as co-investors. After the proposed transaction is completed, KDC REIT will fully own KDC SGP 7 and KDC SGP 8, with Keppel serving as the operator and facility manager. As part of the transaction, KDC REIT will acquire a 49% interest in the JV and subscribe for two new classes of securities issued by the Keppel JV for up to $1.03 billion, giving the REIT a 99.49% economic interest in both data centres. KDC REIT will also have the option to acquire the remaining 51% stake in the JV from Keppel in the second half of 2025, which holds a 0.51% economic interest in the data centres.
In addition, 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. This proposed acquisition is expected to increase KDC REIT’s distribution per unit (DPU) by 8.1%, as well as its assets under management (AUM) by 36% to $5.2 billion with 25 data centres across Asia Pacific and Europe.
Keppel’s share of the divestment will be approximately $280 million, which includes the estimated consideration for Keppel’s 51% stake in the JV should the call option be exercised, as well as additional consideration should the campus be granted a 10-year land tenure lease extension. The JV also has a vacant land plot that 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, KDC SGP 9.
Keppel’s Manjot Singh Mann, CEO of the connectivity division, believes that this transaction highlights Keppel’s ability to structure deals with compelling outcomes and value creation for the company, private funds, and REIT. Keppel’s integrated ecosystem offers access to power and other critical resources, technology expertise, and strong relationships with global internet companies, which are essential for success in the data centre business. With access to multiple pools of capital, Keppel can develop a robust pipeline of AI-ready data centres that provide effective solutions for customers and attractive investments for its funds and REIT.
The CEO of KDC REIT’s manager, Loh Hwee Long, is “excited” to embark on this “landmark deal” during the REIT’s 10th anniversary. The proposed acquisition is expected to be immediately accretive to DPU and will enhance the portfolio’s income resilience while also providing the potential for rental uplifts and capacity expansion. This transaction further solidifies KDC REIT’s position as one of the largest owners of stable data centres in Singapore, where demand is high, and supply is limited. The transaction will be completed in stages and is expected to be finalized by the end of 2025.