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Keppel DC REIT and its parent company Keppel have announced their plans to acquire the Tokyo Data Centre 3 for 82.1 billion yen, equivalent to approximately $707 million. This newly built, freehold hyperscale data centre is located in Inzai City, Greater Tokyo and will be the second data centre asset in Japan for the REIT.

The total purchase price for the Tokyo Data Centre 3 represents a discount of 1.1% to the asset’s valuation of 83 billion yen, or $714.7 million. Upon completion of the deal, Keppel DC REIT will have a 98.47% effective interest in the data centre, with Keppel retaining the remaining 1.53%.

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On a pro forma basis, if the acquisition was completed on January 1, 2024, distribution per unit for fiscal year 2024 would increase by 2.8% from 9.451 cents to 9.712 cents.

According to the CEO of the REIT’s manager, Loh Hwee Long, the Tokyo Data Centre 3 is fully contracted to a leading global hyperscaler for a period of 15 years, with built-in annual rent escalation. He states, “The accretive acquisition of Tokyo Data Centre 3 is aligned with our value creation strategy to pursue hyperscale opportunities in established data centre hubs.”

Loh goes on to say, “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. We are pleased to expand our presence in Japan with another high-quality asset that will enhance our portfolio and strengthen our income diversification.”

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To finance the acquisition, Keppel DC REIT has launched a pro rata non-renounceable preferential offering to raise gross proceeds of approximately $404.5 million. Entitled unitholders of Keppel DC REIT will be offered 80 new units at $2.24 each for every 1,000 existing units held.

Besides the Tokyo data centre, proceeds from the offering will also be used for an asset enhancement initiative at Keppel DC Singapore 8, costs associated with a 30-year land lease extension for Keppel DC Singapore 1, and debt repayment.

The acquisition is expected to be completed by the end of the year, and 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. This will also increase the REIT’s assets under management (AUM) to $5.7 billion, consisting of 25 data centres across 10 countries in Asia Pacific and Europe.

As of now, Keppel DC REIT units are trading at $2.36, remaining unchanged for the day and up 6.79% year to date.