Keppel DC (KDC) REIT’s distributions per unit (DPU) in FY2020 rose by 20.5% y-o-y to 9.17 cents, while 2HFY2020 DPU surged 27.5% to 4.795 cents. DPU growth came on the bank of a 38.6% rise y-o-y in distributable income (DI) to $156.9 million in FY2020.
The growth in DI was supported by full year contributions from Keppel DC Singapore 4 and DC1, as well as new acquisitions in Europe. In 1H2020, KDC REIT acquired the remaining 999-year leasehold land interest at Keppel DC Dublin 1 in Ireland and Kelsterbach Data Centre in Germany. In Dec 2020, the REIT completed the acquisition of Amsterdam Data Centre. As at Dec 31, 2020, assets under management stood at $3 billion, up from $2.6 billion a year ago.
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The manager has been active with asset enhancement initiatives as well. The fitout of a new data hall at Keppel DC Singapore 5 has been completed and handed over to the client in 4Q2020. The fit out works at DC1 is expected to be completed in 1Q2021, and the conversion of additional space at Keppel DC Dublin 2 into a data hall remains on track for completion in 1H2021. In Sydney, Australia, Intellicentre 3 East Data Centre has topped out in October 2020 and is also on track for completion in 1H2021
KDC REIT faces challenges in building new data centres, particularly in Singapore where the regulators have placed a moratorium on more data centres because of emissions.
During a results briefing, when asked whether the manager has heard any more details on Singapore government's moratorium on the building of data centres, Chua Hsien Yang, outgoing CEO of KDC REIT’s manager said, “We have not. Going forward, they do expect the data centres to be a lot greener. They are also encouraging new developers to tap on renewable energy, for example, or that a certain percentage of the power use has to be from renewable sources but of course that itself is a fundamental problem because we don't really have access to a lot of renewable energy in Singapore. So we are not expecting a lot more data centres to be to be built in the short term. The government still has to give guidance to datacentre players in terms of what we can do to help Singapore achieve our carbon emission targets.”
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As for the future, Anthea Lee, incoming CEO of KDC REIT’s manager says she is not expecting to make any major changes. “We have been working on this strategy of first and foremost to continue to acquire and to acquire well. This involves having this strict discipline in terms of making sure that the assets we acquire are really good and beneficial for our unitholders. We have to maintain a strong pipeline in order to be selective. And I think in terms of asset management, we have also been trying to optimise our assets. We have done quite a number of AEIs and we will continue to optimise the returns from the portfolio,” she elaborates. “In terms of capital management we have also been very prudent in the way we manage our gearing. We also carry out equity fundraising as and when the opportunity arises, coupled with acquisitions. So I think these are the key areas that we expect to continue with. Going forward acquisitions are still the main focus for us.”
In FY2020 alone, KDC REIT delivered total unitholder returns of 38.4%. Since its IPO in Dec 2014, KDC REIT has returned 311% to unitholders. During the course of 2020, KDC REIT was included in the FTSE EPRA NAREIT Global Developed Index and the Straits Times Index.
As at its close on Jan 26, KDC REIT is trading at a historic yield of just 3.17% and an annualised yield of 3.32%.