Keppel DC Reit demands 48.3 million yuan late payment from China data centre tenant

KEPPEL DC Reit : AJBU 0%’s wholly owned subsidiary in China, KDCR Guangdong, issued a letter of demand on Friday (Dec 15) to its tenant of three Guangdong data centres (DC) to recover 48.3 million yuan (S$9.1 million) of owed rentals and related expenses.

The Reit’s China unit also requested the tenant, Guangdong Bluesea Data Development, to top up security deposits of 32.2 million yuan.

The manager noted that KDCR Guangdong has been in “close discussion” with Bluesea, who paid the instalments up to October, but failed to make the payment due at the end of November.

Keppel DC Reit acquired its first data centre in China from Bluesea and its parent company for 635.9 million yuan in July 2021. The fully fitted data centre was renamed as Guangdong DC 1.

In June 2022, the Reit acquired two more data centre facilities from Bluesea, which were subsequently named Guangdong DC 2 and Guangdong DC 3, for 1.6 billion yuan.

All three DCs were leased back to Bluesea for 15 years on a triple net basis.

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While Guangdong DC 2 was fully fitted, Guangdong DC 3 is expected to be fully fitted in Q3 2024. Partial payment was made for Guangdong DC 3.

Bluesea should pay the Reit rent for the building shell and interests on the partial payment. The remainder of the payment for Guangdong DC 3 will be made when the fit-out works are completed.

The letter of demand requires the tenant to make payment owed. If the tenant fails to do so, the landlord can terminate the framework agreement, among other actions.

The Reit reserves the right to terminate the transaction documents relating to the acquisition of Guangdong DC 3, said the manager.

“The properties contributed approximately 8.5 per cent of Keppel DC Reit’s gross revenue for the third quarter ended Sep 30,” the manager noted.

On a full-year basis for FY2023, if the rent, coupon and recoveries in relation to the properties as at Dec 31 cannot be recovered, the Reit would face a negative impact on the distribution per unit (DPU) of about S$0.00655. This represents 6.4 per cent of the Reit’s DPU for the previous financial year.

The manager highlighted that it is exploring all options to “seek full recourse” against Bluesea for its breach of the lease agreements and framework agreement, and advised unitholders to stay cautious when dealing with the units.

Units of Keppel DC Reit closed on Thursday up 4 per cent or S$0.08 at S$2.08.