Keppel DC Reit jumps on proposal to buy two S’pore data centres from sponsor Keppel Corp
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Keppel JV owns the Keppel Data Centre Campus in Genting Lane in Singapore.
PHOTO: KEPPEL
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SINGAPORE - Units of Singapore-listed Keppel DC Reit rose on Nov 20 after announcing that it aims to buy two hyperscale data centres here.
Investors liked the news and sent the trust’s units up 4.1 per cent to $2.28, with a hefty 35.6 million units changing hands.
The units are now up around 18 per cent in 2024.
Keppel DC Reit wants to acquire the two fully contracted, artificial intelligence-ready data centres
It will outlay $1.07 billion under a 15½-year lease.
An option to extend the lease by 10 years to July 15, 2050, will raise the price to $1.38 billion, subject to regulatory approval.
While Keppel DC Reit will have ownership of the data centres, its sponsor Keppel will continue to manage, operate and maintain the properties.
Keppel DC Reit announced on Nov 20 that it had raised $700 million through an upsized private placement of new units priced at $2.09, representing a 5.1 per cent discount from its last trading price of $2.20 per unit on Nov 18. A trading halt was called on Nov 19.
This was 3.4 times covered by selected new and existing unit holders comprising institutional and accredited investors, the Reit said.
It added that most of the new units were allocated to investors and real estate specialists with a long-term investment mandate.
Keppel DC Reit will raise an additional $300 million through a preferential offering of new units priced at $2.03 each, a discount of 7.8 per cent from the Nov 18 closing price.
This is open to existing unit holders at an allotment ratio of 86 new units for every 1,000 existing units held. The preferential offering will close on Dec 10 at 5.30pm.
The remaining funds will be raised from the Reit’s sponsors and through debt.
Analysts note that the new units should not have a dilutive impact on the Reit, given that its units trade above net asset value, implying that investors believe the unit price is worth more than its underlying assets.
The move will take the number of Singapore data centres in Keppel DC Reit’s portfolio to eight, raising its exposure to prime local properties at a time when demand is growing rapidly.
The two acquisitions will also lift the Reit’s dividends per unit by at least 8.1 per cent, assuming a 15½-year lease.
Data centres are large, power-intensive facilities built to accommodate servers, data storage systems and networking equipment that support better internet services and telecommunications.
This, in turn, enables popular online activities such as gaming, live streaming and investing, as well as more advanced technologies like cloud computing and AI.
Demand has accelerated in recent years as AI-supported innovations such as searches on ChatGPT, which require more processing capacity compared with traditional internet searches, gained traction.
Keppel DC Reit will also be acquiring the two data centres as availability of such properties in Singapore is expected to tighten.
The country imposed a halt on data centre construction between 2019 and 2022 to assess its impact on the environment.
Operators of new data centres will now be expected to utilise sustainable sources of energy.
