Why Keppel DC REIT plunged >10% within two trading days?

Within a mere two days, Keppel DC REIT saw a decline of over 10% in its stock value. What was the cause?

What happened?

Keppel DC REIT issued a letter of demand to its tenant, Guangdong Bluesea Data Development on 15 Dec 2023.

The Tenant performed its obligations in relation to such instalment payments up to October 2023, but the latest payment that was due in end November 2023 was not duly paid.

What were the contents of the "letter of demand" issued by Keppel DC REIT?

Keppel DC REIT Management is demanding the tenant for the following

• (a) to recover sums in arrears to-date of RMB 48.3 million (equivalent to approximately S$9.1 million), comprising
  • (i) rental arrears of four months and coupon due as at 15 December 2023 of RMB 45.0 million (equivalent to approximately S$8.5 million); and
  • (ii) recoveries including late payment interests and real estate taxes of RMB 3.3 million (equivalent to approximately S$0.6 million (collectively, the “Sums In-Arrears”); and
• (b) to request for a top up of security deposits of RMB 32.2 million (equivalent to approximately S$6.0 million).

How does it affects the shareholders if the REIT is not able to recover the amount?

The Properties contributed around 8.5% to Keppel DC REIT’s Q3 2023 Gross Revenue.

If the rent, coupon, and recoveries for the Properties as of December 31, 2023, cannot be recovered, it is estimated to have a negative impact of approximately 0.655 cents on Keppel DC REIT’s FY2023 distribution per unit (DPU), accounting for 6.4% of FY2022 DPU.

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