Keppel DC Reit acquires Tokyo data centre for $707m, launches preferential offering to help fund it

Bengaluru - Singapore-listed real estate investment trust Keppel DC Reit said on Sept 22 it will buy a newly built data centre in Japan with parent Keppel for 82.1 billion yen (S$707 million).

Keppel DC Reit will hold a 98.47 per cent effective interest in Tokyo Data Centre 3, a hyperscale, five-storey data centre in Greater Tokyo’s Inzai City, while Keppel will hold the remaining stake.

Keppel DC Reit said it agreed to the transaction with a third party and did not name the seller.

The deal value represents a near 1.1 per cent discount to the data centre’s valuation of 83 billion yen.

The Reit said it will raise gross proceeds of $404.5 million through a non-renounceable preferential offering, with around $229.8 million to be used to finance the acquisition.

Entitled unit holders will be offered 80 new units for every 1,000 existing units held, at an issue price of $2.24 per unit.

Units of Keppel DC Reit closed up 1.27 per cent, or three cents, to $2.39 on Sept 23.

Shares of Keppel rose 1.02 per cent, or nine cents, to $8.91.

The deal marks Keppel DC Reit’s second addition of a data centre in Japan to its portfolio, as the Asia-Pacific region witnesses a boom in spending on data centre infrastructure amid the artificial intelligence race.

The Reit expects the purchase to be immediately earnings accretive.

On a pro forma basis, if the acquisition had been completed on Jan 1, 2024, the distribution per unit for financial year 2024 would have increased by 2.8 per cent from 9.451 cents to 9.712 cents.

Said Mr Loh Hwee Long, chief executive of Keppel DC Reit’s manager: “The accretive acquisition of Tokyo Data Centre 3 is aligned with our value creation strategy to pursue hyperscale opportunities in established data centre hubs.

“The favourable demand-supply dynamics for data centres in Japan and the country’s strategic position as an interconnect location between Asia and the Americas make it a compelling market for long-term growth.”

Following the completion of the acquisition, which is expected by end-2025, Tokyo Data Centre 3 will improve the Reit’s portfolio occupancy from 95.8 per cent to 95.9 per cent and increase the weighted average lease expiry from 6.92 years to 7.2 years.

It will also strengthen portfolio resilience and diversification by increasing the proportion of rental income derived from another leading global hyperscaler, the Reit said.

Its assets under management will further increase to $5.7 billion, with 25 data centres across 10 economies in the Asia-Pacific and Europe.

Tokyo Data Centre 3 is fully contracted to a leading global hyperscaler for 15 years with built-in annual rent escalation.

This offers greater cash flow resilience compared with the predominantly fixed-rent contracts in the Japanese data centre market, said Keppel DC Reit.

The acquisition will strengthen its presence in the largest data centre hub in the Asia-Pacific, excluding China.

The Reit said Japan continues to experience strong demand, while new supply remains constrained owing to power and construction limitations.

Strategically situated in Inzai City, one of the most established data centre clusters in Japan, Tokyo Data Centre 3 offers robust network connectivity and low latency to Central Tokyo, it added.

The facility is managed by a global third-party operator with over two decades of data centre experience and a proven track record, the Reit said. REUTERS

With additional information from The Straits Times