Keppel Buying Tokyo Data Centre Project From Mitsui Fudosan for Private Fund

Singapore’s Keppel Ltd has agreed to buy a hyperscale data centre project in western Tokyo from the facility’s developer, real estate giant Mitsui Fudosan, on behalf of a private fund.

The deal follows through on an exclusive framework agreement signed last year by Keppel Data Centre Fund II and Japan’s largest builder on the forward purchase of the project, which broke ground on Tuesday, Keppel said in a release. Financial terms and the project’s location weren’t disclosed, but local media have reported that Mitsui Fudosan is building a data centre on the former site of Polytechnic University’s Sagamihara campus with groundbreaking on that project having been scheduled for 1 November.

The AI-ready facility, dubbed Keppel DC Tokyo 2, is designed to provide more than 300,000 square feet (27,871 square metres) of gross floor area, according to the firm backed by government investor Temasek. The project marks Keppel’s first data centre development in Japan and its second data centre asset in the country, following the recent acquisition of an active Tokyo facility in partnership with the firm’s sponsored Keppel DC REIT.

“We are delighted to celebrate the groundbreaking of Keppel DC Tokyo 2 which firmly establishes Keppel’s presence in Japan’s thriving data centre market,” said Christina Tan, CEO of fund management and chief investment officer of Keppel. “With the rapid growth of generative AI and cloud services, demand for data centres will continue to surge and we are well-positioned to meet the requirements of our hyperscale customers with another future-ready data centre.”

Partnership Blooms

Mitsui Fudosan will develop the core and shell of Keppel DC Tokyo 2, while KDCF II will undertake the fit-out works. The $1.1 billion fund will also appoint Keppel as the facility manager when the project is ready for service in 2027, thereafter generating income for the firm.

“This win-win partnership has enabled Keppel and Mitsui Fudosan to leverage each other’s strengths to develop a high-quality data centre asset that will deliver value for all our stakeholders,” said Hiroyuki Shinozuka, chief operating officer for logistics at Mitsui Fudosan, which has an existing deal with Keppel to explore data centre development and investment opportunities in Japan and Southeast Asia.

With KDCF II having committed more than 90 percent of its total funds, Keppel plans to launch the third vintage of the series later this year. The firm seeks to double its data centre capacity from the current 650 megawatts to 1.2 gigawatts with an additional S$10 billion ($7.6 billion) in funds under management fuelled by KDCF III and further co-investments from investors.

The capital raising is expected to more than double Keppel’s data centre funds under management to S$19 billion, the firm said.

In July, Keppel DC REIT teamed up with its sponsor to buy a western Tokyo data centre at a deal value of JPY 23.4 billion ($140 million), taking advantage of low borrowing costs to secure the trust’s maiden asset in Japan.

The SGX-listed REIT holds a 98.47 percent effective interest in the property, with Keppel Ltd acquiring the remaining 1.53 percent.

Tech Tailwinds

Keppel embarks on its first Japan data centre development after last month’s announcement of its first Taiwan data centre project in partnership with a startup backed by asset management titan BlackRock.

KDCF II entered a 50:50 joint venture with Digital Decarbonization Solutions Platform, a BlackRock-funded platform led by veterans of Logos and Engie, to build an 80MW campus in northern Taiwan. The tie-up aims to ride on the tailwinds of the island’s AI and semiconductor boom.

Keppel’s portfolio comprises 35 data centres across key hubs in Asia Pacific and Europe with a total gross power capacity of 650MW, of which 70 percent is currently operational.