Singapore’s Keppel DC REIT Buying First China Data Centre for $98M

Singapore-listed Keppel DC REIT has agreed to acquire its first data centre in China, a fully fitted facility in Guangdong province, for RMB 635.9 million ($98 million), as mainland assets continue to attract investors assembling regionwide server-hosting portfolios.

Situated within the Bluesea Intelligence Valley Mega Data Centre Campus in the industrial city of Jiangmen, the seven-storey Guangdong Data Centre has a gross floor area of 20,595 square metres (221,689 square feet).

The sellers are Guangdong Bluesea Data Development Co Ltd and parent firm Guangdong Bluesea Mobile Development Co Ltd. The property will be leased back to Bluesea for 15 years on a triple net basis, with the tenant responsible for all outgoings except certain real estate taxes, Keppel DC REIT’s manager said Monday in a press release.

“China is the second-largest data centre market globally as well as the largest market in the Asia Pacific region, it is expected to continue its strong growth momentum,” said Anthea Lee, chief executive of the manager. “The strategic addition of Guangdong Data Centre enables us to ride on China’s growing digital economy and underscores our focus on investing in good quality data centre assets to provide stable and sustainable income.”

Inside Track to Bulk Up

The property, newly built in 2019 with a 50-year leasehold expiring in 2067, is the first of six data centre buildings to be completed at the Bluesea Intelligence Valley Mega Data Centre Campus. Keppel DC REIT will have the right of first refusal to acquire the remaining five data centres within the campus.

Based on an independent valuation by Savills, the market value of Guangdong Data Centre was RMB 690 million as of 1 July 2021, with the purchase price representing a 7.8 percent discount to the valuation. The acquisition of Guangdong Data Centre is expected to be completed in the third quarter, bringing the REIT’s portfolio occupancy to 98.2 percent and weighted average lease expiry to 7.3 years by leased area and 5.3 years by rental income.

The transaction marks the first portfolio acquisition for Keppel DC REIT with Lee as chief executive, after the trust manager’s former deputy CEO and head of investment assumed the top job in February. Her promotion was part of a management refresh announced in November as Keppel pursues its sustainability-driven Vision 2030 plan, which provides a blueprint for the group with a new focus on key sectors like energy, urban development, connectivity and asset management.

Singapore’s top-performing REIT of 2020 on Monday reported distribution per unit of 4.924 Singapore cents ($0.04) for the first half of 2021, which was up 12.5 percent from the trust’s distributions a year earlier.

Exploring the Mainland

This latest acquisition will give Keppel DC REIT a portfolio of 20 data centres across Asia Pacific and Europe, as well as a foothold in Guangdong, which has the highest share of large-scale data centres among Chinese provinces with more than 20 percent of the market, the trust’s manager said.

Keppel Capital, the asset management arm of Keppel Group, announced last July that its Alpha Data Centre Fund would invest RMB 1.5 billion to develop a greenfield data centre in Guangdong, marking the Singaporean conglomerate’s first foray into mainland China’s data centre industry.

Alpha DC Fund is building the 45,215 square metre data centre in Tonghu Smart City, in the city of Huizhou, on a site acquired from a unit of Chinese real estate giant Country Garden Holdings for an undisclosed amount.

Another Singapore-based developer, Temasek-controlled CapitaLand, revealed in April that it would acquire its first hyperscale server facility in China by spending RMB 3.7 billion to pick up a four-building, 75,000 square metre campus in Shanghai’s Minhang district.