Keppel DC REIT and sponsor Keppel are buying the Tokyo Data Centre 3 for 82.1 billion yen, or $707 million. This freehold, newly-built hyperscale data centre is located in Inzai City, Greater Tokyo and will be the REIT's second data centre asset in Japan.
The total purchase consideration represents a discount of 1.1% to the asset’s valuation of 83 billion yen, or $714.7 million.
Upon completion of the deal, Keppel DC REIT will have a 98.47% effective interest, with Keppel holding the remaining 1.53%.
On a pro forma basis, if the acquisition was completed on Jan 1 2024, distribution per unit for FY 2024 would increase by 2.8% from 9.451 cents to 9.712 cents.
According to Keppel DC REIT, the Tokyo Data Centre 3 is now fully contracted to a leading global hyperscaler for 15 years with built-in annual rent escalation.
“The accretive acquisition of Tokyo Data Centre 3 is aligned with our value creation strategy to pursue hyperscale opportunities in established data centre hubs," says Loh Hwee Long, CEO of the manager.
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"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.
"We are pleased to expand our presence in Japan with another high-quality asset that will enhance our portfolio and strengthen our income diversification," adds Loh.
To fund the acquisition, Keppel DC REIT has launched a pro rata non-renounceable preferential offering to raise gross proceeds of approximately $404.5 million.
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Entitled unitholders of Keppel DC REIT will be offered 80 new units at $2.24 each for every 1,000 existing units held.
Besides the Tokyo data centre, proceeds will also go towards an asset enhancement initiative at Keppel DC Singapore 8, cover associated costs for a 30-year land lease extension for Keppel DC Singapore 1, as well as for debt repayment purposes.
The acquisition is expected to be completed by the end of the year and the Tokyo Data Centre 3 will improve Keppel DC REIT’s portfolio occupancy from 95.8% to 95.9% and increase the weighted average lease expiry from 6.92 years to 7.2 years, with its AUM reaching $5.7 billion, consisting of 25 data centres across 10 countries in Asia Pacific and Europe.
Keppel DC REIT units closed at $2.36, unchanged for the day and up 6.79% year to date.
