Mapletree Industrial Trust to buy remaining 60% stake in 14 data centres for US$210.9m

Singapore

THE manager of Mapletree Industrial Trust (MIT) on Tuesday said it had agreed to purchase the remaining 60 per cent interest in 14 data centres in the US from its sponsor for about US$210.9 million.

The portfolio of 14 data centres is held by Mapletree Redwood Data Centre Trust (MRDCT), in which MIT already has a 40 per cent stake. Mapletree DC Ventures, a wholly-owned subsidiary of MIT's sponsor Mapletree Investments, holds the other 60 per cent stake in MRDCT. Upon completion of the proposed acquisition, MIT will fully own the 14 data centres.

The manager said the proposed acquisition is in line with its strategy to grow MIT's high-tech buildings segment. Upon completion, MIT's assets under management will increase to S$6.6 billion from S$5.9 billion as at March 31, 2020. MIT's exposure to data centres is also expected to increase to 39 per cent from 31.6 per cent as at end March, while its high-tech buildings segment will account for about 59.9 per cent, up from 55 per cent.

According to the manager, data centres had demonstrated to be a "resilient asset class" during the Covid-19 pandemic, as it was identified as essential infrastructure in North America and had remained open during the lockdown period.

"The pace of cloud adoption from the increased usage of remote working, video streaming and online gaming is expected to intensify, which will underpin the demand for data centre space," the manager said.

The proposed transaction will enhance income stability of the enlarged portfolio and is expected to be distribution per unit (DPU) and net asset value (NAV) per unit accretive to unitholders, said the manager. According to pro forma estimates provided by MIT, assuming the proposed acquisition was completed on March 31, MIT's DPU would have risen to 12.66 Singapore cents from 12.24 cents, while its NAV would increase to S$1.68 from S$1.62.

The 14 data centres are on freehold land, with a net lettable area of 2.3 million square feet. The portfolio has a weighted average lease to expiry of about 4.6 years, with about 20 per cent of the leases expiring within the next three years. Occupancy rate as at end March stood at 97.4 per cent, while about 97.8 per cent of the portfolio has annual rental escalations of 2 per cent or more.

The purchase consideration of US$210.9 million is derived from 60 per cent of the adjusted NAV of the MRDCT group, after taking into account the agreed value of the properties of US$823.3 million on a 100 per cent basis, less existing MRDCT group debt of US$450 million, and estimated net liabilities of about US$21.8 million.

The total acquisition cost is estimated at US$218 million, including acquisition fee and other fees. The manager intends to finance the proposed acquisition through proceeds from an equity fundraising and the issuance of the acquisition fee in units.

Separately, the manager on Tuesday announced a proposed private placement to issue about 128.1 million new units at between S$2.732 and S$2.80 per unit to raise gross proceeds of at least S$350 million. There is also an upsize option to raise another S$50 million. The issue price range represents a discount of about 2.6 per cent to 5 per cent to MIT's volume-weighted average price of S$2.8745 per unit for trades done on June 22.

The manager intends to use about S$302.6 million, or 86.5 per cent of the gross proceeds from the placement to fund the acquisition. Another S$41.8 million, or 11.9 per cent, will go towards repaying debt, funding future acquisitions, general corporate and/or working capital purposes. The remainder will be used to pay fees and expenses related to the proposed placement.

As Mapletree Investments is a controlling unitholder of MIT and a controlling shareholder of the manager, the proposed deal requires the approval of MIT's unitholders at an extraordinary general meeting to be convened. MIT called for a trading halt on Tuesday, pending this announcement. Units in MIT, which was included in the benchmark Straits Times Index on Monday, closed flat at S$2.84 the same day.