Ascendas REIT Buying 11 European Data Centres From Digital Realty for $671M

Singapore’s Ascendas REIT is stepping up its server-hosting portfolio in a big way with the acquisition of 11 data centres across the UK and continental Europe.

The SGX-listed trust has agreed to acquire the 11-asset portfolio from subsidiaries of US-based Digital Realty Trust for a consideration of S$904.6 million ($671.7 million). The set includes four properties in England, three in the Netherlands, three in France and one in Switzerland.

Ascendas REIT, sponsored by Temasek-backed developer CapitaLand, has only two data centres in its portfolio at the moment, and none in Europe. It aims to increase its exposure to the burgeoning asset class amid increasing reliance on data and online applications and accelerating digitisation across industries, the trust’s manager said in a Wednesday release.

“This acquisition gives us a unique opportunity to own a portfolio of well-occupied data centres located across key markets in Europe,” said William Tay, executive director and chief executive of the manager. “It complements our existing data centre portfolio in Singapore and will increase the sector’s contribution to S$1.5 billion or 10 percent of investment properties under management. We see good potential in the data centre business and will continue to source and make further acquisitions when the opportunities arise.”

Good Data Centres Come in Threes

Of the 11 assets targeted, nine are in what Ascendas REIT calls the top data centre markets in Europe: three in London, a trio in Amsterdam and another set of triplets in Paris. Properties in Manchester and Geneva round out the set. During a Wednesday media presentation, Tay said he expected to complete the acquisition within 12 hours.

The largest facility in the portfolio is a purpose-built, single-storey data centre in Welwyn Garden City about 35 kilometres (21.7 miles) north of central London. The fully occupied centre has 10,541 square metres (113,462 square feet) of net lettable area, or 17 percent of the portfolio’s combined NLA.

The 11 properties have an occupancy rate of 97.9 percent and a weighted average lease to expiry of 4.6 years, Ascendas REIT said. The trust anticipates a net property income yield of 5.7 percent post-transaction, delivering a 1.3 percent gain to distribution per unit.

Tay was uncertain of why Digital Realty decided to shed the assets.

“I don’t know for sure, but I speculate that it is what a typical manager would do,” he said. “This is a chance for them to recycle their capital to other markets.”

Room to Grow

Ascendas REIT chose to add to its pair of data centres in Singapore because the manager believes that the industry fundamentals for data centres in Western economies are strong at the moment, Tay said during the presentation. He also foresees rising data centre demand in hotspot cities like Sydney and Singapore, in addition to the European markets represented in the new portfolio.

Tay’s assessment concurs with findings released last month by Cushman & Wakefield, which ranked Sydney and Singapore third and fifth in a global listing of top data centre markets.

Ascendas REIT’s existing data centres are two adjacent properties in eastern Singapore, 38A Kim Chuan Road and the Kim Chuan Telecommunications Complex, spanning a combined NLA of 58,014 square metres.

Temasek Pursues Digital Strategy

CapitaLand, the biggest shareholder of Ascendas REIT, shares the same enthusiasm for the asset class as Temasek stablemate Mapletree Investments, which announced last month that a recently acquired Hong Kong industrial site would play host to the company’s first data centre in the city.

The site in the New Territories’ Fanling area provides Mapletree with a 4,000 square metre space that can be developed into a maximum gross floor area of 20,140 square metres.

Last September, Mapletree Industrial Trust added to its collection of US data centres through an agreement to purchase a facility in Virginia for at least $204 million. That acquisition was announced less than two weeks after the trust finished buying a 60 percent interest in a set of 14 US data centres from Mapletree Investments, giving it full ownership of that portfolio.

Singapore state holding firm Temasek owns 51 percent of CapitaLand and 100 percent of Mapletree Investments.