Keppel DC Reit raising S$404 million from unitholders to help fund 82-billion yen Tokyo data centre buy
Under preferential offering, unitholders are entitled to 80 units for every 1,000 units owned at $2.24 each
[SINGAPORE] The manager of Keppel DC Real Estate Investment Trust (Reit) has signed a deal to buy Tokyo Data Centre 3 for 82.1 billion yen (S$707 million).
To help fund the deal, Keppel DC Reit is launching a preferential offering to raise gross proceeds of about S$404.5 million. Entitled unitholders of the Reit will be offered 80 new units for every 1,000 existing units held, at an issue price of S$2.24 apiece. The price is a discount of about 5.2 per cent to the volume weighted average price of S$2.3622 on Monday (Sep 22).
In addition to funding the Tokyo acquisition, the proceeds will also go to 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 newly built freehold facility, located in Inzai City, Japan was priced at a 1.1 per cent discount to its 83 billion yen valuation. It is built to a Tier III specification, which means that critical systems can be replaced without operational interruption.
Keppel DC Reit will hold a 98.5 per cent interest in the data centre, while Keppel Japan will hold the remainder. The acquisition is expected to be completed by the end of 2025.
Loh Hwee Long, chief executive officer of Keppel DC Reit’s manager, said in a statement on Monday: “The accretive acquisition of Tokyo Data Centre 3 is aligned with our value creation strategy to pursue hyperscale opportunities in established data centre hubs.”
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He added that “favourable demand-supply dynamics” for data centres in Japan and the country’s position as a link between Asia and the Americas make it a “compelling market for long-term growth”.
The acquisition of Tokyo Data Centre 3 will mark the second Japan data centre in the Reit’s portfolio.
It is fully contracted to a global hyperscaler for 15 years with built-in annual rent escalation, offering greater cash-flow resilience compared to the usual fixed-rent contracts in the Japanese data centre market.
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The acquisition is expected to immediately drive distribution per unit (DPU) growth. If it had been completed on Jan 1, 2024, the DPU for financial year 2024 would have been 2.8 per cent higher at S$0.09712 rather than S$0.09451, said the manager.
Portfolio occupancy is also expected to inch up to 95.9 per cent from 95.8 per cent, with weighted average lease expiry by lettable area to increase from 6.9 to 7.2 years.
Gearing is expected to rise 4.5 percentage points to 34.5 per cent after the acquisition, said the manager, but Citi analyst Brandon Lee estimated it would be higher at 36.3 per cent.
Keppel DC Reit’s assets under management will further increase to S$5.7 billion with 25 data centres across 10 countries in Asia-Pacific and Europe.
Earlier this month, Keppel acquired the 51 per cent remaining interest in two artificial intelligence-ready hyperscale data centres in Singapore from sponsor Keppel for up to S$8.4 million.
It posted a 12.8 per cent increase in DPU to S$0.05133 for its first half of the financial year ended Jun 30, from S$0.04549 in the same year-ago period.
The offering will increase the number of units in issue by 8 per cent, or about 180.6 million units. The counter will be traded on a cum-offer basis up to Sep 25. The record date for eligibility will be Sep 29. Unitholders cannot renounce their unit entitlement to a third party. Units not taken up can be used to satisfy excess units sought by other unitholders.
Units of Keppel DC Reit closed flat at S$2.36, before the announcement.
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