Keppel DC REIT Management Pte Ltd, a Singapore-listed investment trust focused on data centre real estate, has expanded into Japan by purchasing a hyperscaler data centre in Tokyo for S$201 million ($149 million).
In a statement, Keppel DC REIT Management said that it has reached a deal with Keppel Ltd., the management of Keppel DC REIT, to purchase a whole 100% stake in a Tokyo, Japan-based shell and core data centre.
The entire acquisition price is less than 2.5 percent of the JPY 24 billion ($153 million) assessment of the property.
Keppel DC REIT is set to own a 98.47 percent effective stake in the property, with Keppel holding the remaining 1.53 percent effective interest.
Tokyo Data Centre 1, a multi-story freehold facility with 190,166 square feet of net lettable area, was finished in 2019.
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It is master leased to a Fortune Global 500 corporation and a hyperscaler on a triple-net basis.
Due to Japan’s limited supply of data centres and the rising demand for generative artificial intelligence (AI), there is a chance for positive rental reversion and possibility for additional organic growth during the remaining seven years of the lease.
“Our first acquisition in Japan, one of the largest and fastest growing data center markets in Asia, demonstrates our ability to acquire quality assets in key data center hubs,Japan is a core market and the addition of Tokyo Data Centre 1 will further strengthen our portfolio’s geographical, as well as income diversification,” said Loh Hwee Long, Chief Executive Officer of Keppel DC REIT.
The acquisition represents Keppel DC REIT’s first step into the second-biggest data centre hub in Asia, Japan, which is expected to grow at a compound annual growth rate of more than 10% between 2024 and 2028.
The demand for data centres in Tokyo and Japan is anticipated to increase further because to the rise in generative AI, cloud service expansion, digital transformation, and technical advancements like the internet of things.
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Tokyo is home to an estimated 1,000 megawatts (MW) or more of operational information technology (IT), accounting for more than 80 percent of Japan’s total operational capacity.
The statement claims that the addition of Tokyo Data Centre 1 will raise the weighted average lease expiration (WALE) by lettable area from 6.5 years to 6.6 years and improve Keppel DC REIT’s portfolio occupancy from 98.1 percent to 98.2 percent.
Following the acquisition, the portfolio of Keppel DC REIT will be more geographically diversified, more exposed to shell and core leases, and a larger percentage of rental income from customers with investment grade or comparable credit profiles.
Financing costs are anticipated to decrease as Yen-dominated loans have lower prices. With an overall leverage of 39.4% after the transaction is completed, Keppel DC REIT’s average cost of debt will decrease to 3.3 percent.
In 2014, Keppel DC REIT became the first pure-play data centre REIT in Asia when it was launched on the Singapore Exchange.
The company’s investment strategy is to primarily invest, either directly or indirectly, in a diverse portfolio of real estate and assets required to support the digital economy, as well as income-producing properties largely used as data centres.
The investments made by Keppel DC REIT are a combination of debt securities, fully-fitted, shell, and core assets, as well as colocation, which strengthens the portfolio’s resilience and diversification.
About Keppel DC REIT
Keppel DC REIT invests directly or indirectly in a diversified portfolio of income-producing real estate assets utilised mostly for data centres and digital economy assets. as well as properties and assets required to support the digital economy.
