Two subsidiaries of Singapore-based Keppel Corporation have partnered to develop and operate their first greenfield data centre in Malaysia.

The Keppel subsidiary fund Alpha Data Centre Fund (ADCF) and Keppel Data Centres Holdings have joined forces to develop the data centre in Johor, the southern-most state of peninsula Malaysia. 

ADCF entered into agreements with a technology company [the customer]  to develop the data centre. The asset will sit on 261,000sqft of land and, upon expected completion in 2020, will be fully leased by the customer.

A spokesperson for Keppel declined to disclose the value of the deal, saying it was “commercially sensitive”.

Alvin Mah, the CEO of Alpha Investment Partners, manager of the ADCF, said demand for data centres had been increasing with the expansion of the digital economy, and the addition of the greenfield investment provided diversification to the fund’s existing portfolio.

Wong Wai Meng, CEO of Keppel Data Centres, said: “Enterprises have been moving to rationalise their ageing data centre infrastructure, including moving many workload requirements to the cloud.

“In response, to cater to this demand, major cloud service providers and technology companies are expanding rapidly outside of top-tier data centre markets.”

The investment is structured to include put and call options exercisable under certain conditions, the partners said.

Under these options, Keppel Data Centres will be required to purchase the holding company indirectly, holding the Johor data centre and its underlying land title sublease within an agreed period.

The partners said this arrangement would provide Keppel Data Centres with a steady cash flow stream from the data centre, while providing greater flexibility for the Alpha DC Fund to unlock value for investors within the fund life window.

The customer also has a call option to buy back the data centre.

An earlier version of this story referred to Keppel Data Centres Holdings as a fund. Keppel Data Centres Holdings is a data centre developer and manager.