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Keppel announced on Nov 19 that it will sell its data centre joint venture (JV) to Keppel DC REIT (KDC REIT) for a total divestment price of $1.38 billion.
The JV, which is majority owned by Keppel’s connectivity division, owns the Keppel Data Centre Campus in Singapore’s Genting Lane. The campus includes two fully contracted data centres, Keppel DC Singapore 7 (KDC SGP 7) and Keppel DC Singapore 8 (KDC SGP 8), which are leased to global hyperscalers from various sectors.
The construction of KDC SGP 7 and KDC SGP 8 was funded by the JV, Keppel’s private fund Alpha Data Centre Fund, its parallel fund (ADCF), and co-investors.
Upon completion of the deal, KDC REIT will fully own both data centres, and Keppel will continue to serve as the operator and facility manager.
Under the agreement, KDC REIT will acquire a 49% interest in the JV and subscribe for two new classes of securities for up to $1.03 billion. This will entitle the REIT to 99.49% of the economic interest from both data centres. KDC REIT will also have the option to acquire the remaining 51% stake from Keppel in the second half of 2025. The remaining stake holds an economic interest of 0.51% in the data centres.
As part of the deal, KDC REIT will also pay an additional $350 million to the JV shareholders, ADCF and co-investors, if the campus receives approvals to extend its land tenure lease to 2050.
The acquisition is expected to be profitable for KDC REIT, increasing its distribution per unit (DPU) by 8.1%, and expanding its assets under management (AUM) by 36% to $5.2 billion. Additionally, it will give the REIT ownership of 25 data centres across Asia Pacific and Europe.
Keppel will receive around $280 million from the divestment, which includes the estimated consideration for its 51% stake in the JV if the call option is exercised and additional payment for the land tenure lease extension. The gross divestment price will be adjusted for debt repayment and completion adjustments.
KDC REIT will also have the option to acquire a third data centre plot from the JV, which will be sub-leased to Keppel’s private funds, Keppel DC Fund II and Keppel DC Fund III, for the development of KDC SGP 9.
Manjot Singh Mann, CEO of Keppel’s connectivity division, says the deal showcases Keppel’s ability to structure successful deals for its private funds and REIT. He adds that Keppel’s integrated ecosystem and strong customer relationships with hyperscalers worldwide make it a key player in the data centre business, with the ability to invest with multiple pools of capital.
Meanwhile, Loh Hwee Long, CEO of KDC REIT’s manager, says the acquisition is an exciting opportunity for the REIT, particularly in its 10th anniversary. He says the deal is immediately DPU accretive and will enhance the REIT’s portfolio’s income resilience.
The transaction is expected to be completed in stages by the end of 2025 and will solidify Keppel DC REIT’s position as one of Singapore’s largest data centre owners.