On 22 September 2025, Keppel DC REIT, in a joint announcement with its sponsor Keppel Ltd, announced the acquisition of Tokyo Data Centre 3, a newly constructed, freehold hyperscale data centre in Inzai City, Greater Tokyo, Japan.
The total purchase consideration for the facility is JPY 82.1 billion (approximately S$707.0 million), with Keppel DC REIT securing a dominant 98.47% effective interest. This transaction, which is expected to be completed by the end of 2025, represents a strategic move to deepen the REIT's presence in Japan, the largest data centre hub in the Asia Pacific (excluding China).
The asset is highly desirable as it is fully contracted to a Fortune Global 500 hyperscaler client under a 15-year lease with built-in annual rent escalations, which significantly strengthens the portfolio's income stability and resilience. The acquisition is projected to be immediately Distribution Per Unit (DPU) accretive, with a pro forma DPU uplift of 2.8% for FY2024.
To partially fund the deal, Keppel DC REIT has launched a fully underwritten, pro rata, non-renounceable preferential offering to raise approximately S$404.5 million, with the remaining financing to include JPY-denominated debt for a natural currency hedge.
Current shareholders of Keppel DC REIT (KDC REIT) are now faced with a common but important decision: whether to participate in the non-renounceable Preferential Offering (PO) at an issue price of S$2.24 per new unit on the basis of 80 units for every 1,000 units held.
This isn't just about snatching a small discount; it's about aligning our capital with the REIT's future strategy. Here's a breakdown of the key factors we need to consider.
1. The Rationale Behind the Offer
A preferential offering is typically a means to raise capital for growth, and KDC REIT's is no exception. The gross proceeds of approximately S$404.5 million are primarily earmarked for strategic initiatives:
Acquisition of Tokyo Data Centre 3: A significant portion of the funds will partially finance the acquisition of a freehold, newly constructed hyperscale data centre in Inzai City, Greater Tokyo. This is a strategic move to deepen KDC REIT's presence in one of Asia Pacific's largest and most established data centre hubs (excluding China). The asset is fully leased to a global hyperscaler for 15 years with built-in annual rent escalations, offering long-term income stability.
Asset Enhancement Initiatives (AEI): Funds will also be used for an AEI at Keppel DC Singapore 8.
Land Lease Extension: Covering costs associated with the 30-year land lease extension for Keppel DC Singapore 1.
Debt Repayment: A portion will be used to pay down existing debt, helping to maintain a healthy balance sheet.
The acquisition of the Tokyo Data Centre is expected to be yield-accretive, meaning it should increase the distribution per unit (DPU). Pro-forma analysis suggests a DPU increase of around 2.8% for FY2024 if the acquisition was completed then, which is a major positive for income-focused investors.
2. The Mechanics and Financial Impact
The core entitlement allows unitholders to subscribe for 80 new units for every 1,000 existing units held at the record date.
The Discount Factor
The issue price of S$2.24 is set at a discount to the prevailing market price (the unit price was S$2.36 on the day before the announcement). This discount is your immediate financial incentive for subscribing, as you acquire units below the cost of purchasing them on the open market at that time.
The Dilution Risk
If you do not subscribe to your full entitlement, your percentage ownership in KDC REIT will be diluted. The total number of units in issue will increase by about 8% (approximately 180.6 million new units). While the acquisition is DPU-accretive, non-participating unitholders will own a smaller slice of the enlarged DPU-accretive pie, slightly lessening the overall benefit for them.
Should You Apply for Excess Units?
The offering is non-renounceable, meaning you can't sell your rights. However, you can typically apply for excess units. Given that major shareholders have already committed to subscribing in full, and the offering is fully underwritten, the allocation of excess units to minority unitholders may be competitive. But if you have the capital and conviction, applying for excess units allows you to maximise your investment at the discounted price.
3. Verdict: What Should You Do?
The decision boils down to your long-term view on KDC REIT and its sector.
Bottom Line: The acquisition of a fully-leased hyperscale data centre in Japan, with built-in rent escalations and expected DPU accretion, is a strong strategic move. For existing unitholders, subscribing to the Preferential Offering at S$2.24 allows you to participate in this growth at a favourable price and mitigate the dilution effect.
What will I do?
As I am vested in 11,000 shares of KDC in SRS account, I can only subscribe to the preferential offer shares using SRS funds, which I have deployed to money market funds. I am currently redeeming my market market funds and they should arrive in my SRS account next week I will be then able to subscribe to 1,000 shares (excess 120 shares on top of my entitlement of 880 shares) before the dateline of 13 Oct 2025, 5.30pm. The listing and trading of the new shares will commence on 22 Oct 2025, 9am.
