Keppel DC REIT’s 5.714-Cent Distribution: What Supports the Increase?

Keppel DC REIT (SGX: AJBU) declared 5.714 cents per unit for the six months ended 30 June 2026, up from 5.133 cents a year earlier. The 11.3% increase gives unitholders a useful question: how much came from stronger property income, and what could constrain future payments? These are unaudited results announced on 23 July 2026. [S4, p. 2] [S4, p. 25] [S4, p. 32]

Property income grew, but so did the unit base

Net property income rose 15.1% to S$210.4 million. Distributable income, which the REIT reports before setting aside capital-expenditure reserves, climbed 18.5% to S$150.7 million. The manager attributed the improvement to rental reversions and contractual increases, a full contribution from Tokyo Data Centre 3, and larger interests in two Singapore data centres. The Kelsterbach Data Centre sale and higher finance costs partly offset those gains. [S4, p. 2] [S4, p. 5] [S4, p. 6]

The per-unit increase was smaller than the growth in distributable income. Units in issue rose from about 2.26 billion at June 2025 to 2.45 billion at June 2026, spreading the larger income pool across more units. The REIT issued placement and preferential-offering units during 2025. [S4, p. 6] [S4, p. 19]

A S$10.5 million accounting gain on the Kelsterbach sale appeared in first-half 2025 profit. The distribution statement removed that gain when calculating income available for distribution. Its absence this year therefore does not, by itself, undermine the reported rise in distributable income. [S4, p. 4] [S4, p. 6]

What unitholders received

The 5.714-cent distribution comprised 4.838 cents of taxable income, 0.358 cents of tax-exempt income and 0.518 cents of capital distribution. For the AJBU counter a year earlier, those components were 2.145, 1.672 and 1.316 cents respectively. The capital portion is treated as a return of capital for Singapore income-tax purposes; the tax labels alone do not tell us which cash flows will recur. [S4, p. 29] [S4, p. 30]

The REIT set aside S$10.9 million of capital-expenditure reserves from its S$150.7 million distributable-income measure, leaving S$139.8 million for the declared distribution. This distinction matters when comparing the headline income figure with the amount allocated to unitholders. [S4, p. 4] [S4, p. 6] [S4, p. 29]

Cash generation and financing costs

Operating activities produced S$149.8 million of cash, against S$115.6 million a year earlier. That improvement supports the distribution story, but operating cash alone is an incomplete coverage measure: the cash-flow statement places S$28.0 million of finance costs paid under financing activities and S$42.3 million of property capital expenditure under investing activities. It also records S$6.5 million of note coupons received under investing activities. Cash paid during a half-year and the distribution declared for that half-year occur on different schedules. [S4, p. 15]

Borrowings stood at S$2.28 billion at 30 June 2026, while aggregate leverage was 34.0%. Finance costs in profit or loss increased to S$30.7 million from S$24.5 million. The manager reported a trailing interest-coverage ratio of 6.9 times and compliance with borrowing covenants. Those figures show capacity at the reporting date, while the higher finance bill remains a cost to weigh against rental growth. [S4, p. 4] [S4, p. 8] [S4, p. 18] [S4, p. 19]

There is also a tenant-credit qualification. First-half property expenses included a S$10.9 million loss allowance for doubtful receivables related to the Guangdong data centres, broadly similar to the prior year. Portfolio occupancy was 92.5% at June, with the manager attributing the drop to a contract expiry at Cardiff Data Centre. Both deserve attention alongside the growth from acquisitions and rent increases. [S4, p. 5] [S3, p. 3]

What to watch next

The higher distribution has support from increased property income and operating cash generation, and its capital component was smaller than a year earlier. It is not a promise of continuing per-unit growth. The next results should show whether renewed contracts add cash income while finance costs, tenant collections and capital spending remain manageable. [S4, p. 5] [S4, p. 6] [S4, p. 15] [S4, p. 29] [S4, p. 30]