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Keppel DC Reit to raise S$303m from private placement to acquire Jurong data centre

KEPPEL DC Reit announced in an exchange filing on Monday it is seeking to raise some S$303.1 million in a private placement, with the majority of proceeds going towards paying for the acquisition of a new data centre.

The Reit (real estate investment trust) is looking to place 224 million new shares at S$1.353 apiece, which is a 4.9 per cent discount to the volume-weighted average price of S$1.4220 per share for trades last done on the Singapore Exchange on May 4.

Citigroup Global Markets Singapore and DBS Bank are joint bookrunners and underwriters for the placement, which represents a 19.9 per cent increase in the total number of units current in issue.

Around S$298.9 million from the proceeds will go towards partially funding the acquisition of the data centre, with S$4.2 million as payment for fees or expenses incurred in connection with the private placement, with the balance allocated for general corporate purposes or working capital purposes.

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Separately, Reit manager Keppel DC Reit Management announced that trustee Perpetual (Asia) had entered into a conditional share purchase agreement with vendors Kingsland Development, Nylect Holdings and Nylect International to acquire 99 per cent of Kingsland Data Centre Pte Ltd (KDCPL).

The data centre, located at 13 Sunview Way in Jurong, has a lettable area of some 98,769 square feet (sq ft) and is a five-storey purpose-built carrier-neutral data centre, providing data centre solutions and technical support.

The Reit will pay the vendors S$141.2 million in cash to acquire the facility, after deducting S$153.9 million of liabilities from the valuation.

In all, the total cost of the acquisition will be around S$309.6 million. That includes the amount payable to vendors, the estimated indebtedness of around S$159.6 million to be repaid on completion, S$3 million in acquisition fees payable to the manager, S$1.9 million in stamp duty and other fees, and S$3.9 million in land premiums payable to JTC.

Trustee Perpetual (Asia) will be able to draw on vendor-provided rental support for 12 months after completion of the deal, if the adjusted net property income received by KDCPL is less than an agreed threshold of S$25 million.

The trustee can withdraw quarterly top-up amounts not exceeding an aggregate of S$8 million if it determines that the adjusted net property income for that quarter will likely amount to less than the threshold amount.

The centre's current occupancy is 67.7 per cent, and Keppel DC Reit has secured agreements to bring occupancy to 84.2 per cent.

Post-acquisition, the centre will be renamed Keppel DC Singapore 5, and a subsidiary of Keppel Data Centres Holding will be appointed as master lessee and facility manager.

The acquisition represents an opportunity to acquire an "income-producing, purpose-build" data centre in Singapore where data centres are "rarely transacted", Keppel DC Reit said in an exchange filing.

“As a key data centre hub in Asia, Singapore continues to see strong demand from multinational firms for quality data centre space," said Keppel DC Reit Management's chief executive Chua Hsien Yang, adding that the addition of the data centre will allow Keppel DC Reit to establish a "strategic presence" in western Singapore and diversify its offering to clients.

Keppel DC Reit said that the acquision will boost the Reit’s footprint in Singapore to nearly 300,000 square feet of aggregate lettable area.

In a footnote, the Reit stated that should the acquisition not proceed, net proceeds from the private placement will be redeployed to fund future investments, capital expenditure or to pare down debt.