Singapore’s first pure-play data centre REIT in Keppel DC REIT (SGX:AJBU) – where its portfolio comprises 20 data centres in 13 cities across 9 countries in Asia Pacific and Europe, released its annual report for the financial year ended 31 December 2021 yesterday morning (29 March 2022.)
Being a unitholder of the data centre REIT, I have studied the report to stay updated of any latest developments (and also about their plans ahead) and in this post, you’ll find a summary of the most important pointers to take note of, along with information about its upcoming annual general meeting (AGM):
Three-Pronged Strategy to Capture Value from Data Centre Industry & Deliver Sustainable Returns to Unitholders:
- Focused Investment Strategy: Maintaining at least 90% of assets under management in data centre investments, along with maintaining an optimal mix of lease types with colocation assets (which are diversified in terms of client profile and lease terms), along with fully-fitted and shell and core assets with stable long-term leases;
- Proactive Asset Management: Managing portfolio expenses prudently for operational efficiency, and at the same time, optimising portfolio through asset enhancement initiatives (AEI) and other value-creation opportunities including sustainability initiatives;
- Prudent Capital Management: Employing an optimal mix of debt and equity in financing acquisitions to optimise returns, while maintaining financial flexibility.
Summary of Performance in FY2021:
- Gross revenue was 2.1% higher at $271.1m (FY2020: $265.6m), mainly due to full-year contributions from Kelsterbach DC and Amsterdam DC, the acquisitions of Eindhoven DC and Guangdong DC, as well as AEI contributions from the Dublin and Singapore assets, partially offset by the cessation of excess rent paid to the vendor at Kelsterbach DC, divestment of iseek DC, and absence of one-off revenue and expenses reduction from the Singapore colocation assets.
- Distributable income climbed 9.4% to $171.6m (FY2020: $156.9m), with Distribution Per Unit up 7.4% to 9.851 cents/unit (FY2020: 9.170 cents/unit), supported by contributions from DPU-accretive acquisitions (in 2020 and 2021, namely Kelsterbach Data Centre in Germany, Amsterdam Data Centre and Eindhoven Campus in the Netherlands, as well as Guangdong DC), and AEI works (Intellicentre 3 East Data Centre development in Sydney, Australia, as well as completion of AEIs at Keppel DC Dublin 2 in Ireland and DC1 in Singapore.)
- As at 31 December 2021, portfolio occupancy was 98.3%, the highest since listing (and out of the REIT’s 20 assets, 14 are fully-leased), with a long weighted lease expiry of 7.5 years by leased area, a 10.3% increase from a year ago – improvements were driven by active acquisitions and proactive asset management efforts.
- As at end-2021, aggregate leverage remained healthy at 34.6%, with average cost of debt remained low at 1.6% per annum and interest coverage ratio high at 10.8x. Its debt maturity profile was well-spread at 3.9 years. Approximately 74% of their borrowings have been hedged through floating-to-fixed interest rate swaps.
- All colocation facilities in Singapore have certifications in energy and water management systems to ensure high levels of environmental performance, while meeting clients’ needs with zero downtime. Particularly, Keppel DC Singapore 3 and Keppel DC Singapore 4 have been re-certified with the Building and Construction Authority (BCA) Green Mark Platinum Award in 2021.
- In Ireland, Keppel DC Dublin 1 and Keppel DC Dublin 2 continue to be fully powered by wind energy, averting about 20,542 tonnes of carbon dioxide equivalent of Greenhouse Gas emissions.
- The REIT have also embarked on a journey in 2021 to implement the recommendations of the Taskforce for Climate-related Financial Disclosures (TCFD) in 2021, voluntarily committed to the Climate Neutral Data Centre Pact in Europe, and set sustainability goals – some of them include a 50% reduction in Scope 1 and Scope 2 emissions by 2030 from a 2019 baseline, obtaining and maintaining green building certifications, upholding strong corporate governance and having female directors represent at least 25% of the Board by 2025.
- Keppel DC REIT has been focused on the sustainability of its operations and remains fully committed to good corporate governance practices (where a dedicated Board will continue to review and monitor material ESG issues periodically, with support from a dedicated Board ESG Committee that was established in February 2022), which the Management believe are critical to the performance and success of the REIT.
- Outlook-wise, the management remains optimistic about the data centre industry as seen in the increase in investments in digital infrastructure and adoption of IoT, automation, artificial intelligence, and the ongoing rollout of 5G infrastructure – where the amount of data produced is expected to increase exponentially, translating into demand for data centres.
- REIT will continue to focus on growing its portfolio in Asia Pacific and Europe, and remain open to exploring opportunities in new markets and key data centre hubs from both its Sponsor and third parties (both their Sponsor and Keppel’s private data centre funds have more than $2b worth of assets under management and development which they can potential acquire.)
Details of Keppel DC REIT’s AGM:
Keppel DC REIT will be holding its AGM on Wednesday, 20 April 2022, at 3.00pm.
Due to the current safe management measures in place, the meeting will be conducted online (no physical attendance allowed), and if you are a unitholder of the REIT, you can register to attend, along with submitting any questions you may have for the management here (do take note that the deadline to register will be on Monday, 18 April 2022, at 3.00pm.)
I will be attending the meeting as a unitholder of the REIT, and will provide a summary of it in due course.
Disclaimer: At the time of writing, I am a unitholder of Keppel DC REIT.
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