This marks Keppel DC REIT's entry into Japan.
Keppel DC REIT Management Pte. Ltd, manager of Keppel DC REIT, has finalised an agreement with Keppel Ltd. to acquire a shell and core data centre in Tokyo, Japan for JPY 23.4b ($201m).
The acquisition, at a 2.5% discount to its valuation, gives Keppel DC REIT a 98.47% stake in the property, with Keppel holding the remaining 1.53%.
Tokyo Data Centre 1, completed in 2019, boasts a net lettable area of 190,166 sq ft and is leased to a Fortune Global 500 company and hyperscaler on a triple-net basis.
With approximately seven years left on its lease, the centre is poised for rental growth amidst rising demand for generative AI and limited data centre supply in Japan.
The acquisition marks Keppel DC REIT's entry into Japan, Asia's second-largest data centre hub, projected to grow over 10% annually from 2024 to 2028. Tokyo, which has an estimated operational IT load exceeding 1,000 megawatts, constitutes over 80% of Japan's total operational capacity.
Strategically located in West Tokyo, Tokyo Data Centre 1 adheres to the latest seismic design standards and features a base isolation system. This acquisition will enhance Keppel DC REIT's portfolio occupancy from 98.1% to 98.2% and increase the weighted average lease expiry from 6.5 years to 6.6 years.
"Our first acquisition in Japan, one of the largest and fastest growing data centre markets in Asia, demonstrates our ability to acquire quality assets in key data centre hubs," said Loh Hwee Long, CEO of the Manager.
"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," he added.
Upon completion in Q3 2024, Keppel DC REIT's assets under management will rise to $3.8b, with a total of 23 data centres across 10 countries in Asia Pacific and Europe.
The acquisition is expected to be 1.1% accretive to DPU.
The transaction will be funded through Yen-denominated debt, providing a natural hedge over its capital value and benefiting from lower financing costs. Consequently, Keppel DC REIT's average cost of debt will improve to 3.3%, with an aggregate leverage of 39.4%.