Keppel DC REIT Buying Pair of Guangdong Data Centres for $210M

Keppel DC REIT is buying a pair of data centres in Guangdong province for RMB 1.38 billion ($210 million) from Hong Kong-listed data centre operator Neo Telemedia, expanding its footprint in one of China’s major technology hubs.

The manager of the Singapore-listed trust announced late Monday that it has agreed to buy two seven-storey towers in the Bluesea Intelligence Valley Mega Data Centre Campus in the industrial city of Jiangmen, adding 40,920 square metres (440,462 square feet) of built space to its mainland portfolio.

The Singapore-based trust purchased the buildings from a subsidiary of Neo Telemedia, which also sold Keppel DC REIT its first China facility in a deal last year. As part of the agreement, the REIT will lease back both properties to Neo for 15 years.

“Data centres are a critical part of the digital infrastructure that supports many other industries and growth areas,” said Anthea Lee, chief executive of the trust’s manager. “The acquisition will increase the number of data centres in the portfolio that are leased on a master leased basis resulting in higher portfolio weighted average lease expiry and occupancy.”

Full Ownership of Campus Possible

The purchase price of RMB 690.3 million for each of the assets comes in slightly below an independent assessment of the two facilities by Savills, which valued the first structure, Guangdong DC 2, at RMB 698 million and the second building, Guangdong DC 3, at RMB 691 million.

With the shell and core of the properties having been completed in 2020, Guangdong DC 2 is now fully fitted, while fit-out for Guangdong DC 3 is likely to be finished next year. The assets have 45 years left on their land tenure, which will expire in 2067.

The trust is expecting the acquisition to boost occupancy in its 23-asset portfolio to 98.9 percent from 98.7 percent in March, as well as extend the average lease expiry term from 7.7 years to 8.8 years. The acquisition will be completed once the two buildings are fully ready for operation, which is expected around the third quarter of 2023, with the trust’s manager expecting to finance the deal through a mix of debt, equity and existing cash.

The transaction gives Keppel DC REIT ownership of half of the six buildings planned for the Bluesea Intelligence Valley Campus following its acquisition of a 20,595 square metre building from the same Neo subsidiary in July 2021 for RMB 635.9 million.

The SGX-listed trust also has the right of first refusal for the three remaining data centres to be developed within the campus. Mingtiandi understands that the Neo Telemedia unit started marketing Bluesea Intelligence Valley Campus for sale in 2020.

Growing Guangdong Market

Keppel REIT’s acquisition expands its footprint in the Guangdong-Hong Kong-Macao Greater Bay Area just months after China’s top planning body targetted the region as one of the country’s primary hubs for data centre development.

“As a major technology hub and one of China’s most established data centre markets, the Guangdong data centre market is set to grow further with the rising demand for high-quality, efficient data centres, and this market will also benefit from the tightening supply of such critical infrastructure,” Keppel DC REIT’s manager said.

In February China’s National Development and Reform Commission (NDRC) named the Guangdong-Hong Kong-Macao Greater Bay Area, along with the Yangtze River Delta, the Chongqing-Chengdu area and the Beijing-Hebei-Tianjin corridor as national computing hubs which would form the backbone of networks in the nation.

The NDRC predicted at the time that the country’s eight national computing hubs, which also include Inner Mongolia, Ningxia, Gansu and Guizhou provinces, will attract as much as RMB 400 billion of digital infrastructure investment annually.

Keppel DC REIT’s latest targets are located around 200 kilometres (124 miles) away from a site in the Guangdong city of Huizhou where Keppel Corp, the parent of the trust’s manager, in 2020 began developing a greenfield data centre project backed by a RMB 1.5 billion investment from its Alpha Data Centre Fund.