Keppel DC Reit acquiring Sydney data centre for A$43.3m

Singapore

KEPPEL DC Reit has entered into an agreement to buy the shell and core building of Intellicentre 2 (IC2) in Sydney from Macquarie Telecom for about A$43.3 million (S$45.9 million). This is the Reit's first acquisition after listing here last December.

IC2 is a tier III carrier-neutral data centre completed in 2012. It has a total lettable area of 8,169 square metres (sq m), and sits on about 20,000 sq m of freehold land within the Macquarie Business Park, which specialises in communications and information technology sectors.

Colliers has valued the property at A$47.3 million in its report dated Feb 12, 2015.

After the transaction is done, Australia-listed Macquarie Telecom will sign a lease agreement for the property for an initial term of 20 years, with an option to renew for two further terms of five years each.

On the acquisition, Keppel DC Reit CEO Chua Hsien Yang said: "Sydney is a prominent data centre hub given its strong data centre ecosystem with established telecommunication infrastructure, skilled IT resources, geological and political stability, as well as a high concentration of multinational corporations."

"This acquisition builds on Keppel DC Reit's established track record in Sydney and expands its footprint in Australia. Keppel DC Reit will be well-positioned to tap the market's growth potential," he added.

According to Frost & Sullivan, Australia's data centre services market is expected to grow at a compounded annual growth rate of 13.9 per cent from 2013 to 2020.

The consideration will be paid in cash. The first tranche payment of about A$40.3 million will be made when the transaction is completed, while the rest will be payable on the first anniversary of the deal completion. The transaction is expected to be completed in Q3 2015.

The acquisition will initially be fully funded by debt. On completion, the Reit's leverage will likely increase from 26.7 per cent to about 29.9 per cent. The facility is expected to be accretive to the Reit's distribution and net asset value per unit. With the acquisition, the overall portfolio weighted average lease expiry will increase to 9.2 years and the portfolio risk will be lowered through tenant diversification, it said.

Units of the Reit closed trading unchanged at S$1.07 on Thursday.