Keppel DC REIT, Keppel Buy Data Centre in Japan

Keppel DC REIT and sponsor Keppel Holding on Tuesday said that they were acquiring the Tokyo Data Centre 3 for $551.1 million. This freehold, newly-built hyperscale data centre is located in Inzai City, Greater Tokyo and will be the REIT’s second data centre asset in Japan.

The total purchase consideration represents a discount of 1.1% to the asset’s valuation of $557.1 million. Upon completion of the deal, Keppel DC REIT will have a 98.47% effective interest, with Keppel Japan the remaining 1.53%. The acquisition is expected to be completed by the end of 2025, Keppel REIT said.

To help fund the deal, Keppel DC REIT is launching a preferential offering to raise gross proceeds of about $315.3 million. Entitled unitholders of the real estate investment trust (REIT) will be offered 80 new units for every 1,000 existing units held, at an issue price of $1.75 apiece. The price is a discount of about 5.2% to the volume weighted average price of $1.84 as on Monday.

In addition to funding the Tokyo acquisition, the proceeds will also go to an asset enhancement initiative at Keppel DC Singapore 8, cover associated costs for a 30-year land lease extension for Keppel DC Singapore 1, as well as for debt repayment purposes.

According to Keppel DC REIT, the Tokyo Data Centre 3 is now fully contracted to a leading global hyper-scaler for 15 years with built-in annual rent escalation.

Value Creation Strategy

Keppel REIT CEO Loh Hwee Long said that the accretive acquisition of Tokyo Data Centre 3 is aligned with their value creation strategy to pursue hyperscale opportunities in established data centre hubs.

“Long said that the favourable demand-supply dynamics for data centres in Japan and the country’s strategic position as an interconnect location between Asia and the Americas make it a compelling market for long-term growth.

He added: “We are pleased to expand our presence in Japan with another high-quality asset that will enhance our portfolio and strengthen our income diversification.”

The Tokyo Data Centre 3 will improve Keppel DC REIT’s portfolio occupancy from 95.8% to 95.9% and increase the weighted average lease expiry from 6.92 years to 7.2 years, with its AUM reaching $5.7 billion, consisting of 25 data centres across 10 countries in Asia Pacific and Europe.

Earlier this month, Keppel acquired the 51% remaining interest in two artificial intelligence-ready hyperscale data centres in Singapore from sponsor Keppel for up to S$8.4 million.