High maintenance capex threatens stellar Keppel DC REIT

Data centres are costly to keep.

Keppel DC REIT will have to earmark more funds to keep its high-maintenance data centres in good working order.

DBS noted that high maintenance capex is a key risk for Keppel DC REIT, as data centre infrastructure has a shorter lifespan compared to other asset classes.

"It is possible that the REIT may have to rely on borrowings to fund these works, which would result in higher gearing levels, or there could be some pressure on the REIT’s cash flow, potentially affecting its ability to pay distributions," stated DBS.

Keppel REIT reported its maiden results after market hours yesterday, revealing that its net property income has surpassed IPO forecasts by 2%.

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