Digital Core Reit Acquires 20% Stake in Osaka Data Centre for $117 Million
Singapore-based Digital Core Real Estate Investment Trust (Reit) has acquired a 20% interest in an Osaka data centre for approximately 13.2 billion yen (S$117 million).
Acquisition Details
The total acquisition cost consisted of a purchase consideration of 13 billion yen, an acquisition fee of 130 million yen paid to the Reit’s manager, and other professional fees and expenses incurred of about 47 million yen. The acquisition was completed on Tuesday and marks Digital Core Reit’s second investment in Osaka.
Accretive Impact
The acquisition is expected to be about 1.8% accretive to the Reit’s distribution per unit (DPU), bringing it from US$0.036 to US$0.0367 on a pro-forma basis. The Reit’s net asset value per unit is not expected to change.
Data Centre Details
The newly acquired data centre is freehold and fully fitted, with a net rentable area of 193,535 square feet. It was completed in 2021 and is predominantly leased to leading global cloud providers.
Financing and Leverage
The Reit acquired its stake from third-party vendor Mitsubishi Corporation via its wholly owned subsidiary, Digital CR Singapore 4, and financed the deal using yen-denominated borrowings on the Reit’s multi-currency global revolving credit facility. The manager expects to refinance the debt with long-term, fixed-rate yen-denominated debt over the near term, at an estimated borrowing cost of about 2%.
Leverage and Distribution
The acquisition will raise the share of annualised rent contributed by Osaka from 7% to 11%. Aggregate leverage is projected to increase from 34% to 37.3%.
Strategic Rationale
The deal supports the Reit’s strategy to expand its presence in top-tier global data centre markets. Japan is the world’s third-largest data centre market by revenue and a key connectivity hub for internet traffic between Asia and North America.
Market Reaction
Units of the Reit were trading up 1.9% or US$0.01 at US$0.545 as at 9.26 am on Tuesday, after the announcement.
Conclusion
The acquisition of a 20% stake in an Osaka data centre for S$117 million is a strategic move by Digital Core Reit to expand its presence in top-tier global data centre markets. The deal is expected to be accretive to the Reit’s distribution per unit and supports its goal of increasing its presence in key connectivity hubs.
FAQs
Q: What is the total acquisition cost of the data centre?
A: The total acquisition cost is approximately 13.2 billion yen (S$117 million).
Q: What is the expected accretive impact on the Reit’s distribution per unit?
A: The acquisition is expected to be about 1.8% accretive to the Reit’s distribution per unit (DPU).
Q: How will the Reit finance the deal?
A: The Reit will finance the deal using yen-denominated borrowings on its multi-currency global revolving credit facility.
Q: What is the expected borrowing cost for the debt?
A: The estimated borrowing cost is about 2%.
Q: How will the acquisition impact the Reit’s leverage?
A: The acquisition will raise the share of annualised rent contributed by Osaka from 7% to 11%, and aggregate leverage is projected to increase from 34% to 37.3%.
