Keppel DC REIT Adds Data Centre in Frankfurt, Germany for €82M

Keppel DC REIT has agreed to buy a data centre in the digital capital of Europe for €81.8 million ($91 million), according to a stock exchange filing.

The Singapore-listed REIT said that it had entered an agreement to acquire a purpose-built  shell and core facility in Frankfurt, marking its second data centre acquisition in the German city and its eighth Europe-wide.

The acquisition of the freehold property brings the REIT’s portfolio to 18 data centres across 11 locations in Asia Pacific and Europe and comes just three months after the REIT acquired a pair of Singapore facilities for a combined S$585.1 million ($431 million).

Heading Back for Another Frankfurter

“The addition of this data centre will strengthen Keppel DC REIT’s foothold in Germany, which is one of the most established data centre markets in Europe,” said Chua Hsien Yang, CEO of Keppel DC REIT Management.

Chua added that the acquisition underscores the REIT’s intention to capitalise on rising demand for data centres globally.

Located in the suburban town of Kelsterbach, 18 kilometres from the Frankfurt city centre, Keppel’s new facility has a leasable area of 540,869 square feet (50,248 square metres) and is fully leased on a triple-net basis, under which the tenant agrees to pay all real estate taxes, building insurance, and maintenance fees until the end of 2025.

Buying into a Data Hotspot

Just over a year and a half after making its first data centre acquisition in Germany, Keppel DC REIT’s manager indicated that it had again selected Frankfurt for its latest purchase due to the city’s status as an international connectivity hub.

Home to the world’s largest internet exchange, DE-CIX, Frankfurt’s data centre demand is supported by its “strong connectivity, favourable business climate, as well as its position as a major financial hub in Germany”, the REIT manager said.

With the completion of the acquisition expected next year, the manager expected the proposed purchase to be fully funded by debt.

Following the completion of the agreed transaction, the REIT’s aggregate leverage is estimated to increase from 30.3 percent to 33.6 percent, while the REIT’s portfolio occupancy rate will increase from 94.5 percent to 96 percent.

Singapore’s biggest cross-border investor, GIC, got a piece of the Frankfurt data centre market in July of this year when it formed a $1 billion joint venture with California’s Equinix to build and operate hyperscale data centres in Europe. That deal gave the Singaporean sovereign wealth fund a stake in a pair of sites in the German industrial city.

Just last month, mainland tech giant Alibaba signed an agreement with Vodafone to establish a co-location data facility in Frankfurt to service its cloud applications. In June of this year, Japan’s NTT Communications Corporation completed the 24,000 square metre initial phase of its Frankfurt 4 Data Centre facility, adding 80 MW of IT load across five data centre buildings in the complex.

Keppel DC REIT in 2015 chose the Frankfurt suburb of Offenbach am Main for its first European server barn when it entered into a forward purchase agreement to acquire the mainCubes data centre for €84.0 million. The listed trust followed through on that agreement when it took the keys to the 126,800 square foot (by lettable area) facility in April of last year.

Adding Assets in Singapore and Europe

For Keppel DC REIT, its latest German deal would bring the listed trust’s assets under management to $2.7 billion covering an aggregate leasable area of 1.9 million square feet.

Just three weeks ago, the REIT completed the S$200.2 million ($148 million) purchase of the 213,815 square foot DC1 facility in Singapore’s Woodlands Regional Centre from a 51:49 joint venture between Keppel Infrastructure Trust and Tokyo-based Shimizu Corporation.

Three weeks before that transaction, the REIT completed the S$384.9 million purchase of Keppel DC Singapore 4 in the city’s Tampines Industrial Park from a joint venture between its Keppel Group affiliates, Alpha Data Centre Fund and Keppel Data Centres Holding. The trust had agreed to purchase both Singapore facilities in September of this year.

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