Keppel DC REIT Beefs Up SG Bit Barn Portfolio with S$585M Pair of Deals

Keppel DC REIT is set to acquire a pair of Singapore data centres in a pair of transactions totalling S$585.1 million ($426 million), according to an announcement by the manager of the Singapore-listed real estate investment trust.

The Singapore-listed data centre trust is buying the pair of server co-location facilities from two separate joint ventures invested by other divisions of Keppel Corporation as demand for cloud storage in Southeast Asia, and across the APAC region, boosts the prospects for data centre investments in Singapore.

“Singapore is amongst the world’s fastest-growing data centre markets, driven by demand from Internet enterprises as well as the IT services, telecommunications and financial services sectors,” said chief executive officer of the REIT manager, Chua Hsien Yang. “The strategic acquisitions of these two quality data centres will strengthen Keppel DC REIT’s foothold in this robust market.”

The proposed transactions will increase Keppel DC REIT’s portfolio of Singapore data centres from four to six with facilities in the city’s northern, central, eastern and western regions, giving it a wider client reach, according to Chua.

Adding a Tampines Facility

In the larger of the two purchases, the manager of Keppel DC REIT, on behalf of the listed trust, has agreed to acquire a 99 percent stake in Keppel DC Singapore 4 (KDC SGP 4) in Tampines Industrial Park for S$384.9 million.

The five-storey carrier-neutral colocation facility is currently held by a 70:30 joint venture between Alpha Data Centre Fund – a subsidiary of Keppel Capital’s Alpha Investment Partners division – and Keppel Data Centres Holding. The remaining one percent interest in the project would be retained by Keppel Data Centres Holding.

Currently 92 percent occupied, 2017-vintage KDC SGP 4 received the Platinum-grade BCA-IMDA Green Mark Award for New Data Centres and the Platinum-grade BCA Green Mark Award for Non-residential New Buildings in 2017.

Woodlands Facility Added to DC REIT Portfolio

In the smaller acquisition, Keppel DC REIT is acquiring 100 percent of 1-Net North Data Centre (1-Net North DC), a 213,815 square foot facility in the Woodlands Regional Centre, for S$200.2 million.

The listed trust, through its manager, is acquiring the three-year-old facility from a 51:49 joint venture between Keppel Infrastructure Trust and Tokyo-based civil engineering firm Shimizu Corporation.

1-Net North Data Centre is currently let to a subsidiary of Singapore broadcasting conglomerate MediaCorp on a triple net master lease with roughly 17 years remaining.

Acquisitions Funded Through New Equity, Debt

The REIT manager intends to fund the transactions through a two-part S$473.8 million share sale as well as by raising new debt. The equity funding would be comprised of both a private placement and a separate preferential offering,

The proposed acquisitions, which are expected to be completed by the end of the year, will increase the REIT’s assets under management by almost 31 percent to S$2.58 billion.

Keppel Infrastructure Trust, which is divesting its 51 percent stake in 1-Net North DC for S$102.9, intends to use part of the cash for repayment of loans, with the estimated net proceeds of S$51.3 million expected to be redeployed into acquisitions that will strengthen the trust’s portfolio.

The agreed values for both proposed transactions were negotiated on a willing-buyer willing-seller basis, taking into account their respective independent valuations, according to the manager of Keppel DC REIT.

APAC Data Centre Market to Beat US by 2021

The pair of acquisitions follow twelve months of heavy investment in data centre facilities in Southeast Asia, including Facebook’s decision last September to choose Singapore as the site of its first billion-dollar data centre in Asia.

That acquisition by the social media giant was among the transactions that formed the basis for a report by Cushman & Wakefield last month which predicted that Asia Pacific’s co-location data centre market, led by Singapore, is set to become the largest globally by 2021. By 2024, the property consultancy forecasts that the region’s total market size will climb to around $28 billion — 20 percent higher than the $23.4 billion projected for North America.

Just two months ago, Australian-listed property developer Lendlease announced that it had entered a $1 billion partnership with an unnamed institutional investor to build data centres in Asia Pacific.

That July milestone followed just one month after data centre provider Polymer Connected announced it had partnered with GIC to build two data centres in Jakarta. Also in June, NYSE-listed Digital Realty, through a 50:50 joint venture with Japan’s Mitsubishi Corporation, closed on the acquisition of a five-acre Tokyo land parcel for development of a new data facility in Tokyo.

In the first major data deal of 2019, speciliast developer-operator Equinix  announced plans to construct its fourth International Business Exchange (IBX) data centre in Singapore at a cost of $85 million.