Keppel DC REIT, a data center-focused real estate investment trust in Singapore, today announced that it has signed agreements with M1 Limited, a telecom operator in Singapore owned by Keppel Corporation, to invest into M1 Network Private Limited (NetCo), a newly created special purpose vehicle (SPV), which will own M1’s mobile (e.g., base stations), fixed, and fiber assets.

Importantly, through M1’s NetCo transaction, Keppel DC REIT is shifting away from being purely a data center REIT, as it is investing into additional sub-sectors of digital infrastructure. In order to do this, Keppel DC REIT recently expanded its investment mandate to include real estate and assets in the “digital connectivity” sector.

Finally, the transactions between Keppel DC REIT and M1 are expected to be completed by the end of 2021.

Transaction Overview – Keppel DC REIT, M1

M1 is forming NetCo by contributing its mobile, fixed, and fiber assets (Network Assets) to the SPV at their current net book value of $430m USD (S$580m).

Keppel DC REIT M1 Transaction Overview
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NetCo has also entered into a 15-year network services agreement with M1. This will enable M1 and its MVNOs to continue using the network capacity of the mobile, fixed, and fiber assets.

Sources of Funds

NetCo will partially fund the acquisition of M1’s Network Assets through external borrowings of up to $366m USD (S$493m). Indeed, this equates to an 85% loan-to-value (LTV).

Additionally, Keppel DC REIT will invest $66.5m USD (S$89.7m) into NetCo. Specifically, Keppel DC REIT will i) purchase $65.8m USD (S$88.7m) of bonds and ii) $740k USD (S$1.0m) in preference shares issued by NetCo.

Keppel DC REIT will finance its investment in NetCo with external bank borrowings and cash proceeds from its pending divestitures. Also, Keppel DC REIT is investing in M1’s NetCo through its trustee and subsidiary, Perpetual (Asia) Limited and KDCR Singapore 2 Pte Ltd, respectively.

Finally, M1 will hold 100% of the $740k USD (S$1.0m) ordinary shares in NetCo.

Uses of Proceeds

M1 will receive cash consideration of $430m USD (S$580m) from NetCo. With this cash infusion, M1 will fund its “growth initiatives” to become a “digital network operator” in Singapore. Furthermore, the divestiture by M1 forms part of Keppel Group’s asset monetization strategy and asset-light business model.

Keppel DC REIT – Investment Returns and Strategy

Keppel DC REIT will own $66.5m USD (S$89.7m) of bonds and preference shares issued by NetCo. In return, the company states that it will receive $8.15m USD (S$11.0m), which comprises both principal and interest, per annum for 15 years. Therefore, the total principal and interest paid over 15 years would be $122m USD (S$165m).

After deducting Keppel DC REIT’s initial investment (i.e., principal) of $66.5m USD (S$89.7m), this implies that annual interest payments amount to $3.7m USD (S$5.0m). In turn, Keppel DC REIT’s yield on the bonds and preference shares amounts to ~5.6% on a straight-line basis.

Note, that since the principal is repaid over the 15-year period, Keppel DC REIT’s effective interest rate will materially increase during its hold period. As such, Keppel DC REIT references an IRR of 9.2% for its NetCo investment over the 15-year hold period.


Keppel DC REIT views its NetCo investment as providing long-term and stable cash flows, which can help fund unitholder distributions. Furthermore, NetCo’s mobile, fixed, and fiber assets provide diversification to Keppel DC REIT’s data center income streams.

Keppel DC REIT’s NetCo investment will increase its assets under management (AUM) by 2.7% to $2.4bn USD (S$3.3bn). This figure is pro forma for pending acquisitions and divestitures.


Keppel DC REIT and M1 will have equal representation on the board of NetCo. Specifically, each party is entitled to nominate three out of six directors.

Mary Zhang covers Data Centers for Dgtl Infra, including Equinix (NASDAQ: EQIX), Digital Realty (NYSE: DLR), CyrusOne, CoreSite Realty, QTS Realty, Switch Inc, Iron Mountain (NYSE: IRM), Cyxtera (NASDAQ: CYXT), and many more. Within Data Centers, Mary focuses on the sub-sectors of hyperscale, enterprise / colocation, cloud service providers, and edge computing. Mary has over 5 years of experience in research and writing for Data Centers.


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