SINGAPORE (THE BUSINESS TIMES) – Ascendas Real Estate Investment Trust (Ascendas Reit) is looking to acquire 11 Europe data centres for $904.6 million. The purchase would boost the Reit’s exposure to data centres to 10 per cent of its total investment properties, from 4 per cent currently.
The purchase consideration comprises £250.3 million (S$468 million) for four data centres in the United Kingdom and 276.9 million euros (S$443.6 million) for the remaining data centres: three in the Netherlands, three in France and one in Switzerland.
Ascendas Reit’s manager said the acquisition is expected to be accretive to distributions per unit (DPUs). Net property income yield for the first year is estimated at 5.7 per cent after factoring in post-transaction costs.
Units of Ascendas Reit closed at $2.97 on Tuesday, up $0.02 or 0.7 per cent, implying a yield of 4.3 per cent. The counter was halted on Wednesday ahead of the acquisition announcement.
The vendor of the properties is Digital Realty Trust, a New York-listed data centre Reit. Ascendas Reit’s manager expects to complete the proposed acquisition in UK time today.
Following completion, Ascendas Reit will have 60 per cent of its investment properties in Singapore, 14 per cent in the United States, 14 per cent in Australia and 12 per cent in Europe.
The 11 data centres have a total net lettable area of 61,637 square metres (sq m). Six data centres sit on freehold land, while the remaining five are located on land with a weighted average land lease to expiry of 42.9 years.
The weighted average lease to expiry, measured by gross revenue, is 4.6 years. Around 83 per cent of the leases by rental income have embedded annual rent escalations of between 1 and 3 per cent.
As at Dec 31, the data centres were 97.9 per cent occupied by 14 customers operating in industries such as financial services, telecommunications, information technology, retail and education.
After accounting for an estimated transaction cost of $55.4 million, the transaction’s total cost is $960 million. Ascendas Reit will finance this with proceeds from an equity fundraising announced in November, debt financing, and/or internal cash resources.