The manager of Keppel DC REIT has entered into two conditional transactions to acquire two data centre facilities on a fully-fitted basis in Guangdong, China, for a total consideration of RMB1.38 billion ($297.1 million).
Both data centres have a total gross floor area of (440,462 sqft) over seven storeys each. The data centres are designed in accordance with the Code for Design of Data Centre Grade A GB, where Grade A is the highest standard for data centres in China, says the REIT manager.
The data centre facilities were acquired from Guangdong Bluesea Data Development Co. Ltd. (Bluesea) and its parent company, Guangdong Bluesea Mobile Development Co. Ltd.
The data centre facilities will be named Guangdong Data Centre 2 and Guangdong Data Centre 3 (Guangdong DC 2 and Guangdong DC 3) respectively upon the completion of the acquisition.
Guangdong DC 2 is fully-fitted and payment will be made in full at legal completion. Guangdong DC 3 will be fitted out, with its expected completion to take place by the third quarter of 2023. Partial payment will be made for Guangdong DC 3. Bluesea will pay Keppel DC REIT rent for the building shell, as well as interest on the partial payment. The remainder will be paid once the fit-out works are completed.
The properties will be leased to Bluesea on a triple net basis for 15 years.
Based on the valuations by Savills Valuation and Professional Services, an independent valuation firm appointed by the trustee of the REIT, the market values of Guangdong DC 2 and Guangdong DC 3, each on a fully-fitted basis, are RMB 698.0 million and RMB 691.0 million respectively as at June 1.
According to Keppel DC REIT, the Guangdong-Hong Kong-Macao Greater Bay Area has been identified as one of China’s eight national computing hubs that will support the country’s digital development.
The Guangdong data centre market is also set to grow further with the rising demand for high-quality, efficient data centres. In addition, this market will benefit from the tightening supply of such critical infrastructure, says the REIT manager.
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"Data centres are a critical part of the digital infrastructure that supports many other industries and growth areas. 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,” says Anthea Lee, CEO of the manager.
Following the completion of the latest transactions, Keppel DC REIT will own 62.9% of its assets in Asia.
The acquisitions are expected to be accretive to the REIT’s distribution per unit (DPU). Following the completion of the acquisition, the REIT’s portfolio occupancy rate will increase from 98.7% as at March 31 to 98.9%. Its weighted average lease expiry (WALE) will increase from 7.7 years as at March 31 to 8.8 years.
The acquisition for Guangdong DC 2 is expected to be completed in the second half of 2022, while the acquisition for Guangdong DC 3 is expected to be completed by the third quarter of 2023.
The purchase will be funded with a mix of debt, equity and/or existing cash, which will increase the REIT’s aggregate leverage to 37.2% from 36.1% as at March 31.
Units in Keppel DC REIT closed 4 cents lower or 2.05% down at $1.91 on June 20.