Keppel DC REIT Buying Colt Data Centre Near Tokyo in $551M Deal

Keppel DC REIT and its sponsor have agreed to buy a Greater Tokyo data centre from a Colt Data Centre JV in a deal valued at S$707 million ($551 million) after the recently opened facility was leased to Microsoft.

The Singapore-listed trust is acquiring a 98.47 percent stake in the hyperscale facility in Inzai, a data centre hub east of Tokyo, while Temasek-backed asset manager Keppel Ltd will pick up the remaining 1.53 percent, the companies said Monday in a release. The property, which opened its initial phase earlier this year, has been leased to the Seattle-based tech giant, according to industry sources who spoke with Mingtiandi. 

Online sources indicate that the Inzai asset is a newly opened facility developed by a joint venture of London-based Colt Data Centre Services, Colt’s US parent Fidelity Investments and Japanese finance group Mitsui. The five-storey Inzai 4 is fully contracted to a “leading global hyperscaler” on a 15-year lease with annual rent escalations and will be renamed Tokyo Data Centre 3 upon completion of the transaction by the end of 2025.

“The accretive acquisition of Tokyo Data Centre 3 is aligned with our value creation strategy to pursue hyperscale opportunities in established data centre hubs,” said Loh Hwee Long, CEO of Keppel DC REIT’s manager. “The favourable demand-supply dynamics for data centres in Japan and the country’s strategic position as an interconnect location between Asia and the Americas make it a compelling market for long-term growth.”

20MW Project

Colt DCS opened Inzai 4’s 4.8-megawatt first phase in February, with the project set to provide 20MW when fully built, according to an announcement at the time. The facility boasts Tier III specifications, carrying an expectation of less than 1.6 hours of downtime annually, and offers robust network connectivity and low-latency access to central Tokyo, the REIT’s manager said.

Colt had not responded to emailed queries seeking comment on the deal at the time of publication. A representative of Keppel DC REIT told Mingtiandi, “We are unable to disclose the identity of the seller.”

The deal represents a 1.1 percent discount to an independent valuation and adds a second Japanese asset to the REIT’s portfolio, following last year’s acquisition of a western Tokyo data centre.

To finance the acquisition, Keppel DC REIT has launched a preferential offering of new units to raise gross proceeds of S$404.5 million. Entitled unitholders will be offered 80 new units for every 1,000 existing units held at a price of S$2.24 per unit.

The proceeds will be used to partly fund the acquisition of Tokyo Data Centre 3, finance an asset enhancement initiative at Keppel DC Singapore 8 and cover associated costs for a 30-year land lease extension for Keppel DC Singapore 1, as well as repay debt.

Post-acquisition, Keppel DC REIT’s portfolio will include 25 data centres across 10 countries, with assets under management rising from S$5 billion to S$5.7 billion and Asia Pacific exposure by AUM climbing from 81 percent to 83.4 percent, the manager said.

Stabilised Asset

RHB Investment Bank views the Inzai deal positively and estimates a 4 percent net property income yield for the acquisition, taking into account the high-quality customer and long lease.

“The move comes quickly on the heels of its large acquisitions of Keppel DC 7 and 8 last year highlighting Keppel DC’s ambition to be one among the largest and proxy to APAC DC growth,” RHB said in a research note, referring to two Singapore data centres. “The asset’s long leases, quality tenant and JPY-denominated debt borrowing largely mitigates risks and will be a good stable income addition to strong rent growth prospects from Singapore assets.”

Keppel DC REIT acquired Tokyo Data Centre 1 in the third quarter of 2024 at a deal value of JPY 23.4 billion (then $140 million). The 2019-vintage facility is master-leased on a triple-net basis to a Fortune Global 500 company and hyperscaler.

Another hyperscale project in western Tokyo, dubbed Tokyo Data Centre 2, is under development by real estate giant Mitsui Fudosan and held by a Keppel private fund.