Keppel DC REIT Unloads German Data Centre at 39% Off 2019 Acquisition Price 

Data centres may be real estate’s hottest asset class but investors in a Singapore-listed REIT are discovering that demand for rackspace does not guarantee profit.

The manager of Keppel DC REIT notified the SGX on Monday that it has agreed to sell a 1989-vintage data centre in Frankfurt, Germany for €50 million ($52.4 million), which represents a 39 percent markdown from the €81.8 million it paid to acquire the property just over five years ago.

In a statement, the unit of Temasek-backed conglomerate Keppel Ltd spun the disposal as part of an effort to position its portfolio to meet the needs of the industry’s largest customers.

“The divestment of Kelsterbach Data Centre aligns with our strategy to concentrate on the hyperscale data centre market,” Keppel DC REIT Management CEO Loh Hwee Long said in an announcement to the Singapore exchange. “Post transaction, Keppel DC REIT remains well-positioned to pursue accretive data centre investment growth opportunities in key digital hubs in Asia Pacific, Europe and the US.”

Old, Small and Unwanted

In its statement, Keppel DC REIT’s manager noted that the disposal to an unnamed third party was agreed to at a 28.2 percent premium to a €39 million valuation of the property as of 31 December.

At the time it acquired the property in 2019, Keppel DC REIT had pointed out that it had achieved a discount from the asset’s €86 million valuation, with the facility fully leased on a triple-net basis until the end of 2025.

The trust’s manager declined to disclose the capacity of the 36-year-old Frankfurt property, with the disposal coming just weeks after Keppel DC REIT sold a 14-year-old property near Kuala Lumpur to Malaysian data centre platform Basis Bay for S$16.9 million.

The five-storey shell and core Klesterbach facility also includes a six-storey office block and has an attributable lettable area of 540,869 square feet (50,248.4 square metres). The property, one of two Keppel DC REIT locations in Germany, according to the statement, generated S$8.1 million in gross revenue for the REIT in 2024, per the statement. The disposal is expected to be completed in the first half of 2025, Keppel DC REIT Management said.

“The move does not come as a surprise and we see this as part of (Keppel DC REIT’s) ongoing strategy to divest some of its smaller and older portfolio assets in order to sharpen its focus on hyperscale data centres, which is expected to see significant growth from AI trends,” Vijay Natarajan, an analyst with RHB Bank, told Mingtiandi.

Hyperscale Shift

Keppel DC REIT’s January and February disposals come after the trust in November completed the acquisition of two hyperscale data centres from a joint venture between its sponsor, Keppel Ltd, and Cuscaden Peak for S$1.38 billion.

That deal came after the trust in July last year teamed up with its sponsor to acquire a hyperscale data centre in Tokyo for 23.4 billion yen ($150 million), marking the REIT’s first property in Japan.

Keppel DC REIT said that following the divestment, hyperscalers will account for 62.3 percent of total income from its portfolio of 26 data centres, up from 61.1 percent prior to the deal.

Last month, Keppel DC REIT reported a 6.3 percent rise in its net property income to S$260.3 million despite a 37.9 percent rise in its property expenses. The REIT attributed the income jump to positive rental reversions which averaged 39 percent in 2024.

Commenting on those financials, DBS maintained a buy rating on the REIT, saying it expects the trust’s earnings to improve further, driven by recent acquisitions and organic growth at existing properties.