Keppel DC REIT is moving to invest AUD90 million in a Macquarie-issued loan note with proceeds from a divestment it will soon undertake in Sydney.

The note, known as the Australia Data Centre Note (AU DC note), will yield Keppel DC REIT some AUD6.3 million per year, the REIT disclosed on 16 April.

Keppel DC REIT is a Singapore-listed data centre REIT that owns assets across nine countries, including Australia.

One of the assets in Australia, Intellicentre Campus in Sydney, is being divested to Macquarie Data Centres for AUD174 million (SGD152 million).

The agreed value represents a 35.4% premium to the property’s FY2023 valuation of AUD128.5 million.

The AU DC note that Keppel DC REIT is acquiring is guaranteed by MTG, whose facilities house data for some of the world’s biggest hyperscalers, clouds and 42% of the Australian Federal Government.

“Through the AU DC note, Keppel DC REIT will retain its exposure to the Australia data centre market, and receive a regular income stream starting from approximately AUD6.3 million (approximately SGD5.5 million) per year, with a CPI-linked annual escalation mechanism, for 8.5 years”, said the REIT.

“The income stream from the AU DC note will mirror the rental the REIT would receive from Intellicentre Campus if the asset was held for another 8.5 years”, the REIT added.

The transactions are expected to be 0.7% accretive to distribution per unit (DPU) from the Australia DC note subscription and with the cessation of property expenses and financing costs associated with the asset, said the REIT.

Assuming that the transactions had been completed on 1 January 2023, the pro forma DPU for FY2023 will increase from 9.383 cents to 9.446 cents.

Keppel DC REIT was last done on the SGX at SGD1.68, which presently implies a distribution yield of 5.59% according to data on the Singapore REITs table.

By Ridzwan Rahmat

Ridzwan has been analysing REITs and business trusts since 2008, and personally manages a portfolio comprising mainly of SGX-listed REITs. He founded REITsWeek in 2013.