Keppel DC Reit buys two freehold data centres in Japan for US$1.1 billion
Its manager also plans to raise at least S$600 million through a private placement
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[SINGAPORE] Keppel DC Reit and Keppel on Tuesday (Sep 1) said that they have indirectly agreed to collectively buy 90 per cent stakes in two Tokyo data centres for about 171 billion yen (US$1.1 billion).
The two parties will thus jointly own nearly all of Tokyo Data Centre 4 and Tokyo Data Centre 5, which are freehold, hyperscale fully-fitted co-location data centres in Inzai City in Greater Tokyo.
Upon completion of the sale in the fourth quarter of 2026, Keppel DC Reit will hold an 88.62 per cent effective interest in each data centre; Keppel, through its interest in Keppel Japan KK, will hold a 1.38 per cent effective interest.
The existing operator, an “established global data centre owner and operator”, will retain a 10 per cent interest in each asset.
Loh Hwee Long, CEO of the manager of Keppel DC Reit, said: “In addition to immediate distribution per unit (DPU) accretion, Tokyo Data Centres 4 and 5 provide embedded growth through contracted rent escalators and meaningful potential reversion opportunities, while further deepening our exposure to the Japan data centre market.”
The Reit manager also plans to raise at least S$600 million through a private placement on Sep 10. The 280.1 million new units will be issued at a price between S$2.096 and S$2.142.
This represents about a 2.5 per cent and 4.6 per cent discount, respectively, to the volume-weighted average price of all trades on Monday.
Alongside the private placement, Keppel DC Reit’s manager said that it intends to declare an advanced distribution of the distributable income between Jul 10 and Sep 9. This distribution is estimated to be between S$0.02241 and S$0.02281.
Financial impact
The assets’ aggregate purchase consideration of 190 billion yen – calculated on a 100 per cent basis – represents a discount of about a 2.1 per cent to their valuation of 194 billion yen. Keppel DC Reit will pay about 168.4 billion yen.
The acquisition is expected to be immediately DPU accretive. On a pro forma basis, if the acquisition had been completed on Jan 1, 2025, the DPU for FY2025 would have been 2.6 per cent up from S$0.10381 to S$0.10649.
The assets also have a contracted average annual rent escalation of about 2.8 per cent, and in-place rents are estimated to be at least 30 per cent below prevailing market rents, said Keppel DC Reit’s manager.
Weighted average lease expiry (Wale) is about 4.5 years for Tokyo Data Centre 4 and 10.6 years for Tokyo Data Centre 5.
The two data centres are fully occupied by four investment-grade Internet enterprise and IT-services clients. Of the four, three are new to Keppel DC Reit’s portfolio, which the manager said would broaden its client base and reduce client concentration risk.
Following the acquisition, the top client’s contribution to portfolio rental income is expected to fall from 43.5 per cent as at Jun 30 to about 38.2 per cent post-acquisition.
Japan’s contribution to Keppel DC Reit’s portfolio rental income will rise from about 9 per cent as at Jun 30 to about 23 per cent post-acquisition. Still, the manager said the Reit’s portfolio will remain anchored in Singapore, which will account for about 60 per cent of portfolio rental income post-acquisition.
Through the new data centres, the Reit’s portfolio contracted power capacity will rise from about 95 per cent as at Jun 30 to about 96 per cent. Portfolio Wale by lettable area will extend from 6.7 to 6.8 years.
Assets under management will also grow, from S$6.3 billion to about S$7.6 billion across 27 data centres in 10 countries.
The manager added that it intends to fund the acquisition through a mix of equity and yen-denominated debt.
Units of Keppel DC Reit closed flat at S$2.20 on Monday, before the announcement. The trust had called for a trading halt before the market open on Tuesday.
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