IReit’s Sant Cugat Green bags new 12-year lease for 20.4% of property’s total lettable area

IREIT Global on Tuesday (Jun 21) announced that it has secured a 12-year lease for about 5,300 square metres (sq m) of vacant data centre space at its Sant Cugat Green building in Barcelona, Spain, representing around 20.4 per cent of the property’s total lettable area.

The initial annual rent is approximately €0.7 million (S$1 million) and comes with an annual rent indexation based on a 3 per cent margin above the consumer price index in Spain, IReit said.

The tenant of the new lease is a joint venture between 2 Spanish companies with operating history in the information technology and power electronics markets.

The total lease duration includes a 2-year renovation phase that began on Jun 20 and is rent-free, as well as a break option at the end of the eighth year on Jun 19, 2030.

The new lease will push up Sant Cugat Green’s occupancy rate to 97.2 per cent on a pro-forma basis, from 77.1 per cent as at end-March, while the property’s weighted average lease expiry will improve to 5 years from 3.6 years.

The parties have agreed upon a total capital expenditure of some €7.8 million to upgrade the power supply requirements, air conditioning and fire protection of the data centre. Of this amount, IReit will contribute €5.4 million while the tenant will contribute the remaining €2.4 million.

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These upgrading works will bring the data centre to a tier 3 rating, which enhances the uptime performance, valuation and future leasing potential of the data centre space at Sant Cugat Green.

This 12-year lease comes about a month after IReit’s announcement of a 6-year lease extension for 100 per cent at Bonn Campus in Germany. The renewed lease with Deutsche Telekom’s real estate leasing unit, GMG Generalmietgesellschaft, will expire in April 2029.

The Reit expects these positive leasing activities to “add strength and stability” to its portfolio performance on a long-term basis.

Louis d’Estienne d’Orves, chief executive of IReit’s manager, said that since 2016, the data centre space at Sant Cugat Green has not been leased out and is considered structurally vacant.

“We have managed to fill up the entire space in approximately 2 years after we first acquired a stake in the property towards the end of December 2019 – a great achievement considering the challenging operating environment caused by the Covid-19 pandemic, rising inflation, and geopolitical tensions in Europe.

“It is a unique opportunity where the tenant not only takes up a long-term lease at our property, but also invests substantially with us. The end product is a high-quality data centre that optimises the value and long-term marketability of Sant Cugat Green,” he said.

Units of IReit Global ended Tuesday at S$0.62, up 1.6 per cent or S$0.01.