CapitaLand Enters China Data Centre Market with $560M SH Hyperscale Buy

Singaporean developer CapitaLand will acquire its first hyperscale server facility in China, spending RMB 3.66 billion ($560 million) to pick up a four-building campus in Shanghai’s Minhang district.

The 55-megawatt facility is managed by mainland data centre operator Daily Tech — which has ownership links to international internet infrastructure player Global Switch — with CapitaLand seeing its first mainland data centre acquisition as an entree to a sector benefiting from China’s rapid adoption of cloud services and mobile data.

“Data centres are a growing new economy asset class and represent a global investment opportunity and a key strategic business focus for CapitaLand,” said He Jihong, chief executive of data centres and chief corporate strategy officer at CapitaLand Group. “We have built core competencies in data centre design, development and operations, and we will look to deploy our expertise to key markets as we grow our data centre portfolio globally.”

The mainland acquisition comes just over one month after CapitaLand-managed Ascendas REIT bought a set of 11 European data centres, with the Temasek Holdings-controlled firm having included data centres as a focal point of a new corporate strategy announced in March.

Minhang Data Hub

CapitaLand’s new 75,000 square metre (807,293 square foot) data centre campus serves both China Mobile and China Telecom, two of the mainland’s largest carriers, with Daily Tech maintaining close relationships with China Telecom worldwide.

The Singaporean giant is acquiring the facility from AVIC Trust, an investment arm of Shanghai-listed AVIC Capital, and an unrelated third-party vendor, according to the statement. AVIC Trust is also among the largest investors in both Daily Tech and Global Switch.

CapitaLand aims to expand its data centre portfolio into a global business by leveraging its in-house data centre design, development and operational capabilities. The firm pointed to its redevelopment of a six-storey industrial building into a co-location data centre at 9 Tai Seng Drive in Singapore, now leased to technology customers, as a showcase of its expertise in the field.

The acquisition provides CapitaLand with an asset that fulfils the major requirements for a server facility’s success, according to an analyst active in the market.

“The key issues to invest in a mainland China data centre are location, power licence and operator experience,” said Danny Zheng, a director with the capital markets team at Knight Frank in Shanghai. “This project presented an excellent combination for all the above factors.”

Expansion Plans

Puah Tze Shyang, chief executive of investment and portfolio management at CapitaLand China, said the firm sees strong potential to expand the data centre portfolio in cities like Shanghai, Beijing and Shenzhen.

“We may also look for opportunities to take strategic positions in data centre operating platforms to accelerate our growth in a key market like China,” Puah said. “CapitaLand has the resources and reach to help these platforms grow their presence in other parts of Asia.”

In a restructuring plan called “CapitaLand 3.0” released on 22 March, CapitaLand identified data centres, along with business parks and logistics, as areas of focus for the company as it “pivots toward ‘new economy’ asset classes”.

Puah’s colleague Lucas Loh will be watching the expansion unfold from a different viewpoint after relinquishing his role as CapitaLand’s China president this week. Loh is taking on an advisory, non-executive role as the firm’s China chief representative.

Jason Leow, CapitaLand’s Singapore and international president, will take on the oversight responsibilities for the firm’s development-related projects, the company said in a filing.

Global Ambition

Ascendas REIT, which is sponsored by CapitaLand, made a big push into Europe with last month’s news that it would purchase 11 data centres across the UK and in several of the continent’s biggest markets.

The SGX-listed REIT agreed to acquire the 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.

Before the European acquisition, Ascendas REIT had just two data centres in its portfolio, both in Singapore, plus a third facility in the city described as “data centre capable”.

CapitaLand is also considering data centre opportunities in partnership with Ascendas India Trust, He said.

Data in Vogue

CapitaLand shares its enthusiasm for data centres with Temasek stablemate Mapletree Investments, which announced in February that a recently acquired Hong Kong industrial site would play host to the company’s first data centre in the city.

More recently, Dutch pension fund manager APG Asset Management made its second investment in Asia Pacific’s data centre market with this month’s acquisition of a 20 percent stake in Hong Kong-based operator OneAsia, whose key assets include the sprawling Nantong data centre campus northwest of Shanghai.

APG had previously acquired a 10.43 percent stake in data centre operator Chindata, later upping its stake to 19.1 percent after the Beijing-based company’s IPO led by Bain Capital last year.

Global Switch Connection

The origins of CapitaLand’s new asset are deeply linked to Global Switch, which counts AVIC Trust among its largest investors.

The investment affiliate of China’s state-owned aircraft maker, along with Daily Tech chairman Li Qiang and Hong Kong affiliates of China Citic Bank, Haoyue Capital and Jiangsu Sha Steel, in 2018 agreed to buy a 24.99 percent stake in Global Switch for $2.78 billion. That investment came after Daily Tech and Li Qiang had teamed up with AVIC Trust and Ping An to lead the purchase of a 49 percent stake in the London- and Hong Kong-based data centre operator in 2016.

At the time that Daily Tech and AVIC invested in Global Switch in 2016, the parties issued a statement saying they would begin developing a data centre facility in Shanghai. Li Qiang served as chairman of Global Switch from 2016 to September 2019, before resigning from the company’s board in May 2020.