Keppel Data Centre Campus gets conditional approval for 10-year lease extension

[SINGAPORE] Authorities have granted a conditional 10-year lease extension, to Jul 15, 2050, for Keppel Data Centre Campus, which is owned by a Keppel-led joint venture (JV), said Keppel and Keppel DC Reit on Friday (Dec 26).

This is part of a deal announced in November 2024 for the real estate investment trust (Reit) to acquire two artificial intelligence (AI)-ready hyperscale data centres from the JV.

Under the deal, Keppel DC Reit will pay the JV – a collaboration between Keppel’s connectivity division and Cuscaden Peak Investments – S$350 million upon approval of the lease extension. This sum is part of the total sale figure of about S$1.4 billion.

Based on Keppel’s effective stake in the JV, its share of the S$350 million will be around S$70.9 million. Keppel’s stake includes its direct interests in the JV and its indirect interests via the Alpha Data Centre Fund.

Loh Hwee Long, chief executive of the manager of Keppel DC Reit, said that the additional decade of tenure positions the Reit to capture the growing demand of Singapore’s data centre market.

“This extension, coupled with targeted asset enhancement initiatives (AEI), will reinforce portfolio resilience and unlock growth opportunities, strengthening our ability to deliver sustainable returns,” Loh said.

The decade-long extension provides “a further runway and flexibility” for Keppel DC Reit to execute AEIs, including fit-outs of unutilised space into data halls for Keppel DC Singapore 8, said Keppel and the manager of Keppel DC Reit.

They added that such initiatives are expected to drive revenue and valuation uplift benefits due to the extended land tenure, amplifying returns on investment.

The extended tenure also helps with client retention and contributes to a resilient portfolio and a consistent stream of high-quality cash flows, they said.

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Keppel divests remaining interests in two Singapore data centres for S$50.5 million to Keppel DC Reit

The lease extension and the acquisition of the remaining interests in Keppel DC Singapore 3 and Keppel DC Singapore 4 announced earlier in December, will increase the assets under management in Keppel DC Reit’s portfolio by around 8.5 per cent to S$6.2 billion, from S$5.7 billion.

Keppel will also leverage the extended land lease to advance the campus’ third data centre, Keppel DC Singapore 9. This will be developed by Keppel and its two data centre private funds, the Keppel Data Centre Funds II and III.