Keppel DC REIT Reports Flat H1 DPU as Guangdong Data Centres Offset Higher Costs

Keppel DC REIT’s first-half distribution per unit was nearly flat compared with year-earlier levels, as the Singapore-listed data centre trust reported higher income but steeper finance and electricity costs.

DPU stood at S$0.05051 for the first six months of the year, edging up from S$0.05049 in the same period of 2022, the trust’s manager said Monday in a release. Distributable income rose 0.2 percent year-on-year to S$91.3 million ($68.7 million).

While the acquisition of two Guangdong data centre projects helped boost distributable income, that growth was offset by higher costs from refinanced and floating-rate loans and lower contributions from Singapore co-location assets arising from higher facilities expenses, including electricity costs. On the whole, property expenses shot up 7 percent year-on-year.

“In 1H 2023, gross rental income was higher mainly due to the acquisition of Guangdong DC 2 and building shell of Guangdong DC 3, as well as contract renewals and income escalations,” the manager said.

Healthy Occupancy

Keppel DC REIT’s portfolio occupancy remained healthy at 98.5 percent in the first half, with a weighted average lease expiry of 8 years at the end of June. The majority of rental income is derived from clients with investment-grade or equivalent credit profiles, the manager said.

In June, the trust paid RMB 1.38 billion ($210 million) to acquire the two seven-storey Guangdong buildings from Hong Kong-listed Neo Telemedia, which also sold Keppel DC REIT its first China facility in a deal last year. As part of the agreement, the REIT is leasing back both properties to Neo for 15 years.

Despite macroeconomic headwinds, data centre demand is expected to remain resilient, the manager said, citing a Structure Research report forecasting the global data centre co-location and interconnection market to grow 12 percent year-on-year to $72.7 billion in 2023.

“Looking ahead, the manager remains cautiously optimistic on growth opportunities and will continue to grow its diversified global portfolio of data centres, with a focus on diversification to strengthen income resilience,” it said.

Leadership Transition

The financial update is the first since Keppel DC REIT announced last month that Anthea Lee would depart as the trust’s CEO, to be succeeded by Loh Hwee Long.

Loh, who serves as chief investment officer of Keppel Data Centres, is due to take over as the REIT’s new boss this Friday. Upon assuming the role, he will relinquish the CIO job he has held since mid-2021.

Temasek-backed Keppel Corporation, which owns the trust’s manager, in May announced plans to shift to a horizontally integrated model comprising fund management, investment and operating platforms. The operating platform will consolidate the group’s existing business units, which include Keppel Data Centres, with horizontal teams evaluating opportunities in targeted asset classes.