Keppel DC Reit to acquire two China data centres for $338 million

SINGAPORE (THE BUSINESS TIMES) - Keppel DC Reit has entered into conditional transactions to acquire two data centres in Guangdong, China, for a total price of about 1.6 billion yuan (S$338.3 million), the company said in a bourse filing on Monday (June 20).

These acquisitions are expected to be accretive to the real estate investment trust's (Reit) distribution per unit (DPU).

They will also bump up the Reit's portfolio occupancy rate to 98.9 per cent from 98.7 per cent as at end-March, and raise its weighted average lease expiry to 8.8 years from 7.7 years.

Keppel DC Reit will acquire the two facilities - located at Bluesea Intelligence Valley Data Centre - from Guangdong Bluesea Data Development and its parent company, Guangdong Bluesea Mobile Development.

The properties will be leased to Bluesea on a triple net basis for 15 years.

The first property, located at No. 6 Bluesea Intelligence Valley Data Centre, is a seven-storey fully fitted data centre building with a gross floor area of about 20,310 sq m.

The total purchase consideration for this property was 690.3 million yuan.

Savills Valuation and Professional Services had valued this property at 698 million yuan as at June 1 based on the income capitalisation and discounted cash-flow analysis methods. This transaction is expected to take place in the second half of this year.

The second property, located at No. 7 Bluesea Intelligence Valley Data Centre, is a seven-storey data centre building with a gross floor area of about 20,610 sq m.

The total purchase consideration for this property stood at 690.3 million yuan.

As at June 1, the property was valued at 691 million yuan on a fully fitted basis, according to a valuer commissioned by the trustee of Keppel DC Reit.

In line with the framework agreement, the seller is responsible for the internal decoration of the building's premises, as well as the installation of facilities and equipment for it to be rendered a fully fitted data centre.

While partial payment will be made for this property, Bluesea will pay Keppel DC Reit rent for the building shell and an interest on the partial payment, with the remainder to be paid when the fit-out works are completed. The handover of this facility is expected to take place by the third quarter of next year.

The construction of the shell and core of the buildings was completed in 2020, with each of them having a 50-year leasehold land tenure expiring in January 2067.

The total consideration, as well as the value-added taxes, for both properties will be paid fully in cash.

Keppel DC Reit's manager intends to fund the purchase considerations with a mix of debt, equity and existing cash.

Keppel DC Reit's aggregate leverage is expected to rise to 37.2 per cent after the completion of the transactions, up from 36.1 per cent as at end-March.

On a pro-forma basis, if the transactions had been completed on Jan 1 last year, Keppel DC Reit's DPU for the fiscal year ended Dec 31, 2021, would have been $0.10113 instead of $0.09851.

If the transactions had been completed on Dec 31 last year, the Reit's net asset value per unit as at that time would have been $1.36, compared with $1.34 without the transactions.

These properties are two of six data centre buildings which have been or are to be developed within the Bluesea Intelligence Valley Mega Data Centre Campus.

These are in addition to Guangdong Data Centre, which was acquired by Keppel DC Reit on Dec 16 last year.

Following the completion of the transactions, Keppel DC Reit will own three of the aforementioned six data centre buildings, and will continue to have a pre-emptive right of first refusal to acquire the remaining data centre buildings to be developed within the campus.

Ms Anthea Lee, chief executive of Keppel DC Reit's manager, said: "Data centres are a critical part of the digital infrastructure that supports many other industries and growth areas.

"The acquisition will increase the number of data centres in the portfolio that are leased on a master-leased basis, resulting in higher portfolio weighted average lease expiry and occupancy."

Units of Keppel DC Reit were trading up two cents, or 1 per cent, at $1.93 at 9.24am on Tuesday.