Singapore-based conglomerate Keppel Corporation announced it will spin off its data center joint venture (JV) to Keppel DC REIT in a strategic move to consolidate and optimise its data centre assets. The deal, valued at a total gross divestment price of S$1.38 billion (approximately $1.03 billion), underscores the group’s focus on enhancing asset monetization and aligning with its broader business objectives.
The JV, co-owned by Keppel’s Connectivity Division and Cuscaden Peak Investments, encompasses the Keppel Data Centre Campus in Singapore. The campus includes two operational data centers, KDC SGP 7 and KDC SGP 8, which are integral to Singapore’s critical digital infrastructure.
Keppel’s share of the total gross divestment price is estimated at approximately S$280 million. This valuation accounts for the potential consideration arising from Keppel’s 51% stake in the JV if the call option is exercised. While Keppel divests ownership, it will retain its operational and management responsibilities for the two data centers.
This arrangement aligns with Keppel’s strategy of managing high-performing assets while unlocking capital for further investments in growth areas.
Keppel DC REIT, a leading data center-focused real estate investment trust, will acquire full ownership of the two data centers, KDC SGP 7 and KDC SGP 8. The acquisition is expected to bolster Keppel DC REIT’s portfolio, strengthening its ability to generate resilient and stable income.
“These assets will not only enhance our portfolio’s income resilience but also allow us to capture potential upside from rental uplifts and capacity expansion,” said Loh Hwee Long, CEO of Keppel DC REIT.
The move reflects the growing demand for high-quality, scalable data centers in Singapore, a global hub for digital services.
The acquisition of KDC SGP 7 and KDC SGP 8 is projected to be immediately accretive to Keppel DC REIT’s distribution per unit (DPU), enhancing returns for its unitholders. The two centers are already operational and generating robust cash flows, making them valuable additions to the REIT’s portfolio.
Keppel DC REIT’s portfolio, which spans multiple geographies, focuses on data centers—a critical component of modern digital economies. With the integration of these Singapore-based centers, the REIT is poised to capitalize on the increasing reliance on cloud computing, e-commerce, and data-driven services.
For Keppel, this divestment supports its capital recycling strategy, which aims to unlock value from its extensive asset portfolio. The proceeds will likely be reinvested into higher-growth initiatives, including sustainable urbanization projects and digital connectivity ventures.
To finance the acquisition, Keppel DC REIT announced an equity fundraising placement targeting proceeds of about S$1 billion. New units will be issued at a price range of S$2.074 to S$2.128 per unit.
This fundraising effort underscores the REIT’s commitment to maintaining a prudent financial structure while pursuing accretive acquisitions. Analysts expect strong interest from institutional and retail investors, given the REIT’s proven track record of delivering stable returns.
Singapore has solidified its position as a premier data center hub in Asia, driven by its robust connectivity, political stability, and favorable business environment. The country’s strategic location makes it a gateway for digital services across the region.
Keppel’s divestment reflects the broader trend of increasing investor interest in data centers as an asset class. The global demand for data storage and processing capabilities has surged, fueled by advancements in technologies such as artificial intelligence, the Internet of Things (IoT), and 5G networks.
As Singapore grapples with sustainability concerns related to energy-intensive data centers, Keppel’s operational expertise will be critical in ensuring that KDC SGP 7 and KDC SGP 8 remain efficient and environmentally sustainable.
Keppel has been at the forefront of developing innovative solutions to reduce the carbon footprint of data centers. Its ongoing management of these facilities could incorporate green technologies and sustainable practices, aligning with Singapore’s ambitious climate targets.
Market analysts view this transaction as a win-win for both Keppel and Keppel DC REIT. Keppel benefits from monetizing its assets while retaining management rights, ensuring operational continuity. Meanwhile, Keppel DC REIT strengthens its portfolio with prime data center assets that promise steady returns.
“This deal highlights Keppel’s ability to execute its asset-light strategy while reinforcing its position as a leader in digital infrastructure,” said a research analyst from DBS Group. “For Keppel DC REIT, the accretive nature of this acquisition enhances its attractiveness to investors.”
The proceeds from this divestment provide Keppel with a significant war chest to fund its strategic priorities. As the company continues to pivot towards sustainable urbanization and digital connectivity, it is well-positioned to explore opportunities in emerging markets and green technologies.
With its expanded portfolio, Keppel DC REIT is set to benefit from growing data center demand, particularly in Asia. The trust’s emphasis on high-quality assets and disciplined financial management positions it as a key player in the data center investment space.
