GDS Holdings has agreed to acquire a data centre campus in Beijing for RMB 2.5 billion ($348 million) as the company ramps up its capacity to keep up with the rising demand for cloud and digital technology across China, according to a company announcement.
The acquisition by the Shanghai-headquartered data centre developer will add a further three assets with a combined floor area of 19,700 square metres (212,049 square feet) to the company’s existing 242,435 square metre portfolio of carrier and cloud neutral facilities.
The company’s fortification of its services to Beijing’s data-hungry social networkers comes just under four months after GDS reached an agreement with Singapore’s sovereign wealth fund, GIC, to build and operate build-to-suit data centres for an undisclosed internet and cloud service provider in China.
The data centre builder declared in its statement that two thirds of the campus has been pre-committed to an undisclosed video streaming service that became a customer of GDS this year, while the remaining third has been taken by a “leading internet company”.
In a presentation created to support its third quarter earnings call with investors, GDS cited only Tencent-backed social video app Kwai as a new customer during the period, while Alibaba, Tencent and Baidu have all been customers of GDS since 2016.
GDS did not name the property’s current owner in the statement, however, in Beijing’s Shunyi district, where GDS’ new acquisition is located, China Telecom lists its 80,000 square mete ChinaCache Atecsys Data Center campus, and Beijing Tianjin Zhongyunxin Technology has also opened the 40,000 square metre Zhong Yunxin Shunyi Data Centre.
Bringing More Data Centre Capacity to the Capital
“Data centre capacity in Beijing is scarce,” said William Huang, GDS’ chairman and CEO. “The addition of this data centre campus adds substantially to our presence in China’s largest Tier 1 data centre market and expands our relationship with two key hyperscale customers.”
Located eight kilometres from the company’s existing Beijing 5 data centre, the new campus adds two recently-completed facilities and a nearly-finished project to GDS’ portfolio.
The oldest of GDS’ trio of facilities in China’s capital, known as Beijing 10, opened in 2017 and has a net floor area of 6,400 square metres, while the 2018-vintage Beijing 11 has a net floor area of 6,500 square metres.
The third facility – Beijing 12 – is currently under construction and is expected to enter service in the first half of 2020 with a net floor area of 6,800 square metres.
Raising Capital through a Public Offering
GDS said that it has agreed to pay a total cash consideration of RMB 785.1 million for the server facility, which is based on the RMB 2.5 billion enterprise value of the campus less assumed liabilities. That sum includes RMB 185 million that is dependent on the future performance of the data centres.
In a separate announcement today, the NASDAQ-listed company said that it intends to finance the acquisition in part through an offering of approximately $250 million in American Depositary Shares.
$190 million of the proceeds from that proposed share sale would be put to funding a portion of the cash consideration of the Bejing data centre, along with assumption of liabilities associated with the acquisition, with the remainder of the capital set aside to fund other land, building and data centre purchases.
JP Morgan, RBC Capital Markets, BofA Securities and Haitong International are acting as joint bookrunners for the proposed offering.
Racing to Keep Up with Online Demand
With Alibaba Cloud estimating that China’s cloud services market is growing by 100 percent per annum, GDS is racing to keep up with mainland data demand.
The company’s August announcement of its joint venture with GIC came just five months after it had secured a $150 million equity investment from Ping An Overseas Holdings to help fund its expansion.
GDS’ competitor, Chayora Holdings has also been stockpiling capital for expansion, with the mainland-focused data centre developer selling a majority of its stock to UK fund manager Actis for $180 million in October of this year.
With that cash in hand, Chayora is already developing a pair of hyperscale facilities in a 2.3 million square foot campus the company operates 120 kilometers southeast of Beijing.
And just last month, Hong Kong-based real estate fund manager Gaw Capital Partners announced its establishment of a joint venture with mainland data centre developer and operator Centrin Data to acquire, develop and operate hyperscale facilities in China, with the partners seeding that vehicle with a data centre just west of Shanghai.