Singapore-listed Keppel DC REIT, a data centre-focused Real Estate Investment Trust, has agreed to acquire the shell and core buildings of a data centre in Milan for €37.3 million.
The REIT is managed by Keppel DC REIT Management, a holding company jointly owned by asset manager Keppel Capital and Keppel Telecommunications & Transportation. Both shareholders are subsidiaries of Temasek-backed Keppel Corporation.
The asset, sitting on freehold land 8km away from the Milan city centre and accessible via metro, has been “fully leased to one of the world’s largest telecommunications companies, on a double-net lease structure for 12 years since January 2016,” according to a statement.
The lease provides annual rental escalations and an option to renew for another six years while the client will continue to manage the facility, own the fit-out, as well as bear operating expenses and capital expenditure for the mechanical and electrical equipment.
“The acquisition is expected to be accretive to Keppel DC REIT's distribution per unit and will enhance its income stream stability through geographical diversification,” Keppel said, adding Milan is home to the Milan Internet Exchange point and is a strategic location as an emerging regional IT hub.
The acquisition will be fully funded by debt and is expected to be completed in the third quarter of this year. Keppel DC REIT will have its aggregate leverage increased to approximately 32.5 percent post-transaction and assets under management will increase to around S$1.13 billion ($841 million; €753 million). Its current portfolio comprises nine data centres in seven cities in six countries in Asia Pacific and Europe.
“This acquisition complements the REIT's existing portfolio profile and growth plans by increasing the proportion of European assets and master-leased facilities. The addition of the shell and core asset on a double-net basis will require minimal capital expenditure, and also adds a well-established client to the REIT's client base,” said Chua Hsien Yang, chief executive of the Keppel DC REIT.
Keppel T&T, the REIT’s sponsor, has granted rights of first refusal to the REIT for future acquisition opportunities of its data centre assets.
Keppel Corporation is also raising a $500 million data centre fund, which reached a $130 million first close last month. The Alpha Data Centre Fund aims to build a portfolio of both greenfield and brownfield assets across key data centre hubs in Asia Pacific and Europe.