They may offer investors some shelter, given their weak correlation with US and global equities

 

[SINGAPORE] Sabana Industrial Reit : M1GU +1.43% (Sabana) kicked off the current earnings release season for S-Reits on Apr 15 with the release of its Q1 2025 financial results. This was followed by Keppel DC Reit : AJBU -0.98% and Keppel Pacific Oak US Reit : CMOU -1.65% both reporting Q1 2025 business updates on Apr 17.

 

Another 26 S-Reits have also confirmed that they will unveil financial results or business updates between Apr 22 and May 7 for their respective periods ended Mar 31 2025. Among them, three will report full-year financial results, three will report first-half or third-quarter financial results, and another 20 will provide quarterly business updates.

 

Sabana reported 26.5 per cent year-on-year growth in Q1 2025 income available for distribution per unit (DPU), led by a 22 per cent growth in net property income (NPI) and 4.6 per cent growth in gross revenue. Earnings uplift was due to higher occupancy at the majority of its multi-tenanted portfolio, particularly at Sabana@1TA4 and 33, 33A and 35 Penjuru Lane, which saw the highest increases.

 

Portfolio occupancy for Sabana improved from 85 per cent at the end of last year to 86.4 per cent as at Mar 31 2025. Specifically, the occupancy rate of 33, 33A and 35 Penjuru Lane rose to 86.3 per cent, an improvement from 73.7 per cent at the end of last year. Sabana achieved a high tenant retention rate of 99.7 per cent in Q1 2025, and all leases expiring in FY2025 have been activated for renewal and negotiations. Sabana continues to achieve double-digit rental reversion of 15.3 per cent for Q1 2025, following four consecutive years of positive double-digit rental reversion since FY2021.

 

Keppel DC Reit reported 14.2 per cent year-on-year growth in DPU, mainly due to contributions from acquisitions of Keppel DC Singapore 7 and 8 and Tokyo Data Centre 1, as well as higher contributions from contract renewals and escalations in 2024. Keppel DC Reit&rsquo s NPI and gross revenue grew 24.1 per cent and 22.6 per cent year on year, respectively.

 

Keppel DC Reit continues to see acquisitions as a parallel growth driver, with target markets including Japan, South Korea and Europe. Its assets under management have grown approximately five times to S$5 billion over the past 10 years since its listing. 

 

Keppel Pacific Oak US Reit posted a 19.3 per cent year-on-year decline in income available for distribution, mainly due to a 6.5 per cent decline in adjusted NPI, as a result of lower rental income from higher free rents due to timing differences in leases completed for the respective periods.

 

Keppel Pacific Oak US Reit has an occupancy rate of 89.1 per cent as at Mar 31, 2025, slightly lower than the 90 per cent recorded at the end of last year. However, its historical occupancy since 2019 remains higher than the US average and US gateway cities at 86 per cent and 83.4 per cent, respectively, as at Mar 31, 2025. Keppel Pacific Oak US Reit continues to remain focused on the fast-growing TAMI (Technology, Advertising, Media, and Information), medical and healthcare sectors across the key growth markets in the US. 

 

Low Huan Ping is appointed as director other resolutions are passed with more than 90% in favour

 

[SINGAPORE] Keppel DC Real Estate Investment Trust : AJBU -0.98%(Reit) lead independent director and chair of its nomination and remuneration committee Kenny Kwan failed to get re-elected at the annual general meeting (AGM) on Apr 15.

 

About 49.9 per cent of the votes cast endorsed his reappointment as a director, representing 632,589,622 units. The 50.1 per cent against the resolution represented 634,277,814 units, the Reit&rsquo s manager said in a bourse filing after the AGM. 

 

Kwan, who has an interest in 44,851 units of the Reit, will thus need to step down from his position.

 

Separately, Low Huan Ping, who holds 46,480 units, was appointed as a director at the AGM.

 

Other resolutions on ordinary business were also passed, with more than 95 per cent of unitholders&rsquo votes in favour of the moves. These were on receiving and adopting various reports and statements for the 2024 financial year, as well as reappointing the Reit&rsquo s auditor and authorising the manager to fix the auditor&rsquo s remuneration.

 

In addition, over 90 per cent of the voters passed a resolution on special business to authorise the manager &ldquo to issue units and to make or grant convertible instruments&rdquo .

 

The AGM was held before the release of Keppel DC Reit&rsquo s first-quarter results on Thursday (Apr 17). It posted a 14.2 per cent year-on-year increase in distribution per unit to S$0.02503. The counter closed at S$2.03 the same day, down S$0.02 or 1 per cent.

It sees Trump&rsquo s tariffs increasing complexity and regulatory uncertainty for data centre demand 

 

[SINGAPORE] Keppel Data Centre Reit (Keppel DC Reit) : AJBU -0.98% recorded a higher distribution per unit (DPU) of S$0.02503 for the first quarter, up 14.2 per cent from S$0.02192 in the previous corresponding period, said its manager.

 

Distributable income (DI) for the period rose 59.4 per cent to S$61.8 million, from S$38.8 million in the year-ago period.

 

The rise in DPU and DI was driven by contributions from its acquisitions and a robust portfolio performance, said the manager on Thursday (Apr 17).

 

The manager added that the DI included capital expenditure reserves, which were set aside for computing the DPU based on eligible unitholders&rsquo entitlements.

 

Q1 rental income from Guandong data centres (GDCs) was net off via loss allowances which impacted the quarter&rsquo s DPU by S$0.00249.

 

Revenue for the quarter climbed 22.6 per cent to S$102.2 million from S$83.4 million in the first quarter of FY2024. 

 

GDC&rsquo s rental income continued to be recognised under gross revenue and finance income, the manager said.

 

For Q1 of FY2025, net property income grew 24.1 per cent to S$88.1 million from S$71 million previously.  

 

Higher net property income was primarily due to acquisitions of Keppel DC Singapore 7, Keppel DC Singapore 8 and Tokyo Data Centre 1, alongside higher contributions from contract renewals and escalations in 2024. 

 

However, it was partially offset by the divestment of Intellicentre Campus and a one-off dispute settlement sum at Keppel DC Singapore 1, which was received in 2024. 

 

Finance costs stood at S$12.5 million, down 4.1 per cent from S$13 million previously. This was due to interest rates decreasing and interest savings from loan repayments, but was partly offset by new loans in 2024 for acquisitions, said the manager. 

 

Finance income rose 40.1 per cent to S$3.9 million from S$2.8 million in the year prior. Property expenses grew 13.9 per cent to S$14.1 million from S$12.4 million.

 

Aggregate leverage was 30.2 per cent as at Mar 31, 2025, lower by 130 basis points from Dec 31, 2024. The average cost of debt was 3.1 per cent. The interest coverage ratio for the trailing 12 months was at 5.8 times.

 

The manager noted that the Reit&rsquo s debt profile was &ldquo favourable&rdquo , stating that its sponsor subscription of S$85 million was completed in February 2025. This forms part of its equity fundraising of S$1.1 billion, launched in Q4 of 2024.

 

The Reit secured new loan facilities of around S$570 million that are available for drawdown, added the manager. This includes a S$150 million multicurrency green loan facility.

 

Portfolio occupancy stood at 96.5 per cent as at end March as portfolio reversion was at 7 per cent with no major contract renewals for the quarter.

 

Its portfolio weighted average lease expiry (Wale) was 7.1 years by lettable area. Wale by rental income was 4.4 years as a higher proportion of rental income was from colocation assets, which typically have shorter contractual periods, the manager noted.

 

With 78 unique clients in its portfolio as at March 2025, Internet enterprises contribute to the bulk of its rental income with a 63.1 per cent share. This is followed by clients in IT services who contribute to 16.9 per cent of rental income and telco clients with 15.9 per cent.

 

As at March 2025, its assets under management (AUM) stood at S$4.9 billion, with the Asia Pacific region taking up the lion&rsquo s share of 81.6 per cent of its AUM and Singapore with 66.3 per cent. It has 24 data centres across 10 countries.

 

Outlook: AI trends to drive growth

Artificial intelligence (AI) trends are set to drive data centre demand globally, said the manager. Generative AI workloads are fuelling most growth in data centre capacity at a projected compound annual growth rate of 39 per cent until 2030.

 

Asia-Pacific data centre demand is set to accelerate in 2025 as utilisation rates are expected to improve to 88.8 per cent.

 

The rise of competing AI models like DeepSeek stand to reshape expectations around AI&rsquo s infrastructure needs, said the manager.

 

Evolving AI governance alongside geopolitical developments such as US President Donald Trump&rsquo s sweeping tariffs could also &ldquo introduce new layers of complexity and regulatory uncertainty for data centre demand&rdquo . 

The manager of Keppel DC REIT (KDC REIT) said that the REIT has obtained two loan facilities worth a total of $300 million, according to a bourse filing on March 28. 

 

The two facilities are a $150 million revolving credit facility, and a $150 million revolving green credit facility. 

 

The bourse filing does not state what the term facilities will be used to finance. 

 

The manager said that the facility contains conditions where mandatory prepayment events may occur. 

 

KDC REIT will be required to pay all outstanding loans together with accrued interest and all other moneys owing under or pursuant to the loan facilities within 10 business days in the event that the manager ceases to be a subsidiary of Keppel. 

 

In the event the prepayment occurs and such an occurrence would cause a cross default under other borrowings of KDC REIT group, the aggregate level of utilised and unutilised facilities that may be affected is as at the date of this announcement $2,578 million excluding interest and fees. 

 

It is looking to tap sponsor Keppel&rsquo s growing pipeline of data centres

 

[SINGAPORE] The manager of Keppel DC Real Estate Investment Trust (Keppel DC Reit) plans to capitalise on sponsor Keppel&rsquo s intended expansion of its portfolio of data centres to a gross power capacity of 1.2 gigawatts (GW) in the near term, it said in the annual report released on Monday (March 24).

 

&ldquo (That) will form a pipeline of assets that Keppel DC Reit may potentially acquire. Moreover, Keppel&rsquo s established track record and the extensive network with industry players provide us with access to exclusive, off-market deals from third parties,&rdquo said Christina Tan, chairman of Keppel DC Reit&rsquo s manager.

 

&ldquo We will continue to optimise our capital structure to support our growth ambitions,&rdquo she added.

 

In July 2024, the Reit acquired Tokyo DC 1, a three-storey shell and core data centre in West Tokyo, for 23.4 billion yen (S$209.2 million) In November, the Reit announced its acquisition of two artificial intelligence (AI)-ready data centres in Singapore, KDC SGP 7 and 8, for S$1.4 billion from its sponsor Keppel.

 

In its earnings release in February 2025, Keppel announced that its data centre portfolio had reached a gross power capacity of 650 megawatts in 2024, up by a factor of 2.7 times from 2018.

 

On top of its upcoming Bifrost Cable System (slated for completion in H2 2025), Keppel&rsquo s connectivity business is exploring the development of two more subsea cable systems between South-east Asia and other Asian regions, the company said. Keppel intends to expand its portfolio power capacity to 1.2 GW in the next few years, it added, capitalising on opportunities from rapid growth in digitalisation and AI.

The Reit&rsquo s asset portfolio distribution is currently made up of 65.3 per cent in Singapore, with an additional 15.4 per cent of its data centre assets based in Asia-Pacific countries including Australia, China, Japan and Malaysia.

 

The manager posted a distribution per unit for FY2024 of S$0.09451, up 0.7 per cent on the year.

 

For the full year, net property income was up 6.3 per cent at S$260.3 million, from S$245 million previously. Revenue rose 10.3 per cent on the year to S$310.3 million. Distributable income was up 3 per cent at S$172.7 million, from S$167.7 million previously. As at Dec 31, 2024, the Reit&rsquo s portfolio is valued at S$4.83 billion, with a total of 25 data centres across 10 countries. The Reit manager added that it would continue to pursue investments in newer and AI-ready assets.

 

Rising demand on growing AI market in Apac

The data centre market&rsquo s rapid expansion has been underpinned by growth from global cloud service providers, which accounted for 22.7 per cent of global supply in 2024, noted an independent review on the global data centre market by research firm DC Byte.

 

Additionally, with a surge in adoption of AI services, demand for co-located data centre services has sharply increased, averaging 43.9 per cent compound annual growth rates from 2019 to 2024.

 

DC Byte noted that while the supply of co-location services in the Asia-Pacific region has seen the most significant growth, especially in established markets such as Australia and Japan, emerging markets in South and South-east Asia present untapped potential for data centre demand, fuelled by the emergence of AI.

 

The Asia-Pacific&rsquo s AI market is projected to grow to US$82 billion by 2024, and at a compound annual rate of 17.5 per cent to reach US$215 billion by 2030, the report noted.

 

Further investments are expected to flow into these markets, driven by population growth and demographics, as well as improvements in digital infrastructure and data sovereignty regulations.

Keppel DC REIT: Sustainable Growth in Singapore, Green Shoots in China

 

S-REITs Set for Comeback in 2025: Interest Costs Stabilizing, Logistics & Data Centers Lead the Way

 

Keppel DC REIT plans to divest its Kelsterbach Data Centre in Frankfurt for 50 million euros, or $70.6 million. Part of the proceeds will be used to pare debt. On a pro forma basis, the REIT' s aggregate leverage will improve by 0.3 percentage points to 31.2%.

 

The sale is expected to be completed in 1HFY2025, leaving Keppel DC REIT with one data centre in Germany, also near Frankfurt.

 

Following the sale, Keppel DC REIT' s portfolio occupancy will remain high at 96.6%, while the weighted average lease expiry (WALE) by lettable area will improve from 6.3 years to 7.4 years.

 

&ldquo The divestment of Kelsterbach Data Centre aligns with the REIT' s strategy to concentrate on the hyperscale data centre market where demand trends match Keppel DC REIT&rsquo s core competencies, says Loh Hwee Long, CEO of the manager.

 

" This further strengthens the resilience of our portfolio, which is firmly anchored by hyperscale clients with overall high occupancy and long WALE," says Loh.

 

" Our proactive portfolio management strategy enables us to unlock value and redeploy capital into higher-yielding data centre assets, that will further optimise returns to our Unitholders," he adds.

 

With the outlook for interest rates murky, it may be best to stay with data centres as an investment theme. Global inhabitants continue to consume and produce vast quantities of digital data. According to DigitalReportal, 5.52 billion people were using the internet at the start of October 2024, equivalent to 67.5% of the world&rsquo s population. Internet users continue to grow too, with the latest data indicating that the world&rsquo s connected population grew by 151 million users in the 12 months to October 2024.

 

Based on the artificial intelligence (AI) megatrend and the rising number of digital natives, data centre occupancy is likely to remain high despite new supply. AI is required to help sift through the ever-increasing amount of data collected in data centres.

 

According to global tech market intelligence provider IDC, organisations are projected to have spent US$235 billion ($321 billion) on AI. This figure is expected to reach over US$630 billion by 2028, representing a CAGR of 30%.

 

Data centres are experiencing critical supply shortages in many markets, according to JLL in its 2025 outlook report. This is despite a high number of completions this year, which are forecast to be above the 2021&ndash 2024 peak in the US, Europe and Asia Pacific. &ldquo Shortages will still exist &mdash such is the growing demand for data centres, boosted by AI requirements, that even this increase in supply will be only a fraction of what the market needs,&rdquo JLL says.

 

Investors need to invest wisely, though. &ldquo Interest rates and financing costs unlikely to return to 2021 lows. Performance will be more determined by asset, market and sector selection and active management to drive income growth,&rdquo JLL cautions.

 

A safe investment for investors looking for recurring income could be Keppel DC REIT, analysts suggest. &ldquo In the upcoming results, we expect Keppel DC REIT to show the strongest interim DPU growth at +9.5%,&rdquo says Goldman Sachs in an update on Jan 17. Keppel DC REIT&rsquo s DPU in 3QFY2024 ended Sept 30, 2024 was 2.5 cents. In contrast, REITs under Goldman Sachs&rsquo coverage is expected to show a 2% decline in DPU on average.

 

&ldquo In the upcoming results, we believe Keppel DC REIT could &lsquo beat&rsquo [consensus estimates] as its recent advanced distribution implies FY2024 DPU of 9.38 cents, 2% ahead of consensus,&rdquo JP Morgan concurs.

 

The US banking behemoth says that along with recent weakness in regional currencies vs SGD/USD investors should focus on S-REITs with Singapore or US assets. Keppel DC REIT&rsquo s exposure to Singapore has increased to 63% (or $3.1 billion) of total assets of $4.9 billion (from 53% as at the end of Sept 30, 2024) following the acquisition of Keppel DC Singapore 7 (KDC SGP 7) and Keppel DC Singapore 8 (KDC SGP 8) in December last year.

 

Both KDC SGP 7 and KDC SGP 8 are immediately DPU-accretive by as much as 11.1%, taking pro forma 1HFY2024 DPU to 5.055 cents.    

Following the Singapore acquisition, on a pro forma basis, Europe comprises 19.8% of assets under management and China&rsquo s share declines to 5.1% from 7% as of end of Sept 30, 2024.  

 

Both KDC SGP 7 and KDC SGP 8 are colocation AI-ready data centres. Additionally, Singapore is the top data centre hub in Asia with extensive undersea cable networks and high-speed internet access. Demand in the Lion City continues to be fuelled by increasing digitalisation, continued cloud adoption and AI.

 

As one of the most power-constrained markets globally, Singapore&rsquo s colocation vacancy rate of around 1% and among the lowest in Asia Pacific. Before the acquisition of KDC SGP 7 and KDC SGP 8, colocation data centres Keppel contributed 67.2% to rental income.

 

Contracted rentals for KDC SGP 7 and KDC SGP 8 on take-or-pay basis are estimated to be at least 15% to 20% below comparable market colocation rents. Colocation rents in Singapore for data centre capacity are expected to trend upwards over the next few years given the tight demand-supply dynamic, according to DC Byte.

 

&ldquo With demand expected to exceed supply in the coming years, utilisation rates are expected to rise from 99.1% in 2024 to 99.4% in 2028,&rdquo says Keppel DC REIT&rsquo s manager, referring to colocation assets, in the REIT&rsquo s circular for its December EGM.  

 

Since Keppel DC REIT is one of the largest owners of stabilised data centre assets in Singapore, it is poised to benefit from further growth in colocation rates &ldquo underpinned by strong demand and limited capacity&rdquo , analysts say.