Keppel DC REIT makes first data centre investment in China

Keppel DC REIT makes first data centre investment in China

Singapore-listed Keppel DC REIT is acquiring Guangdong Data Centre, a fully-fitted data centre facility in Jiangmen, Guangdong Province, for RMB 635.9 million (approximately S$132.0 million). 

The company said it has entered into agreements with Guangdong Bluesea Data Development Co. Ltd. (Bluesea) and its parent company, Guangdong Bluesea Mobile Development Co. Ltd. to acquire the facility.

This marks Keppel DC REIT’s first data centre acquisition in China. 

“China is the second largest data centre market globally as well as the largest market in the Asia Pacific region, it is expected to continue its strong growth momentum. The strategic addition of Guangdong Data Centre enables us to ride on China’s growing digital economy and underscores our focus on investing in good quality data centre assets to provide stable and sustainable income,” said Anthea Lee, CEO of Keppel DC REIT Management Pte. Ltd. (the Manager).

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The property will be fully leased back to Bluesea on a triple net basis for 15 years. With a gross floor area of approximately 20,595 sqm (221,689 sq ft), the seven-storey data centre is 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.

Situated within the Bluesea Intelligence Valley Mega Data Centre Campus, the facility is the first of six data centre buildings to be completed.

As part of this agreement, Keppel DC REIT will have the right of first refusal to acquire the remaining five data centres within the campus. 

Guangdong Data Centre is located within the Greater Bay Area (GBA), which includes Guangzhou, Shenzhen and Jiangmen. Surrounding the Pearl River Delta, the GBA boasts a rich ecosystem of startups, incubators and accelerators across various industry verticals. It is also one of China’s most vibrant economic regions, with a high concentration of China’s Fortune Global 500 companies and housing many of the country’s innovative technology companies. Amongst China’s provinces, Guangdong has the highest share of large-scale data centres, commanding more than 20% of the market.

Based on the valuation by Savills Valuation and Professional Services (S) Pte Ltd, an independent valuation firm appointed by the trustee of Keppel DC REIT, the market value of the property was RMB 690.0 million (approximately S$143.2 million) as at 1 July 2021. The purchase price represents a 7.8% discount to the independent valuation

The acquisition is expected to be accretive to Keppel DC REIT’s distribution per Unit. Post-acquisition, Keppel DC REIT’s portfolio occupancy rate will increase from 98.0% as at 30 June 2021 to 98.2%, and weighted average lease expiry will increase from 6.5 years as at 30 June 2021 to 7.3 years. 

Expected to be completed in the third quarter of this year, the Manager intends to fund the purchase consideration with a mix of debt and/or equity. Post completion, Keppel DC REIT’s aggregate leverage is expected to increase from 36.7% as at 30 June 2021 to 37.5%.

With the acquisition of Guangdong Data Centre, Keppel DC REIT will have a portfolio of 20 quality data centres across Asia Pacific and Europe.