Keppel DC Reit to raise S$473.8m to help fund data centre acquisitions

Singapore

KEPPEL DC Reit is planning to raise about S$473.8 million to partially fund the acquisition of a 99 per cent stake in data centre Keppel DC Singapore 4 (KDC SGP 4), along with a 100 per cent stake in 1-Net North Data Centre (1-Net North DC).

The proposed equity fundraising comprises a combination of a private placement and preferential offering, as well as debt. The Reit's aggregate leverage ratio will be reduced from 31.9 per cent to 30.3 per cent as at June 30, its manager said on Monday. Both acquisitions, which are slated to be completed in the fourth quarter, are expected to be highly accretive to Keppel DC Reit's distribution per unit, the manager added. When completed, the Reit's assets under management will grow by 30.7 per cent to S$2.58 billion, comprising 17 data centres globally.

Chua Hsien Yang, CEO of the manager, said: "Singapore is amongst the world's fastest-growing data centre markets, driven by demand from Internet enterprises as well as the IT services, telecommunications and financial services sectors. The strategic acquisitions of these two quality data centres will strengthen Keppel DC Reit's foothold in this robust market."

The proposed equity fundraising comprises a private placement of 135 million new Keppel DC Reit units at between S$1.703 and S$1.744 per unit; and a preferential offering at between S$1.67 and S$1.71 per unit. The private placement issue price range represents a discount of between 2.5 per cent and 4.8 per cent to the volume-weighted average price (VWAP) of S$1.7882 for trades on Sept 13, the preceding market day before the underwriting agreement was entered into; while the preferential offering issue price range represents a discount of between 4.4 per cent and 6.6 per cent to the VWAP.

Keppel DC Reit's private placement was launched on Sept 16, with new units from the placement expected to be listed on Sept 25. Separately, books closure date for the eligibility to participate in the preferential offering is Sept 24. The opening date for the preferential offering is Sept 27, with new units from the preferential offering expected to be listed on Oct 15.

The manager intends to use S$438.6 million, or 92.6 per cent of the gross proceeds from the equity fundraising, to partially fund both acquisitions. It added that it has entered into an agreement for the proposed 99 per cent acquisition of KDC SGP 4 at an agreed value of about S$384.9 million, with the remaining stake to be acquired by an entity of Keppel Data Centres Holding. The seller for KDC SGP 4 is a joint venture between Alpha Data Centre Fund and Keppel Data Centres Holding.

KDC SGP 4 is a five-storey facility with a net lettable area of about 84,544 sq ft, and an occupancy of 92 per cent. It is located close to two of the Reit's existing data centres, Keppel DC Singapore 2 and 3 within the Tampines Industrial Park.

In a separate statement on Monday, KIT's trustee-manager noted that KIT's subsidiary, CityDC, is divesting a 51 per cent stake in DataCentre One to Keppel DC Reit for S$102.9 million. The remaining 49 per cent held by WDC Development (WDC) will also be acquired by the Reit for S$98.9 million. DataCentre One is a joint venture company formed in June 2014 between CityDC and WDC to develop, build and lease 1-Net North DC. The estimated deal amount of S$201.8 million is payable in cash.

1-Net North DC is a five-storey purpose-built facility located at 18 Riverside Road. In June 2019, CityDC launched a tender for the sale of the property and Keppel DC Reit was selected as the preferred bidder. Shaun Poh, executive director of capital markets at Cushman & Wakefield, who handled the sale, said the deal is noteworthy, given that the supply of data centres is tight across Asia, particularly in Singapore. "The tight supply situation is compounded by the fact that Singapore has pledged to reduce carbon emissions, putting a lid on the allocation of land for data centre use, as these assets consume high volumes of energy," added Mr Poh.

Estimated net proceeds to be received by KIT is S$51.3 million, subject to adjustments at completion of the transaction. The divestment is conditional upon the approval of KIT's unitholders.