Mapletree Industrial Trust and Mapletree Investments to buy US$1.4B data center portfolio

Mapletree Industrial Trust property at 18 Tai Seng in SingaporeMapletree Industrial Trust property at 18 Tai Seng in Singapore

Mapletree Industrial Trust and Mapletree Investments formed a 50:50 joint venture to acquire a US$1.4 billion, or around S$1.90 billion, data center portfolio in North America from Digital Realty Trust, the companies said in a filing to SGX Monday.

Under the deal, Mapletree Industrial Trust and Mapletree Investments will acquire 10 Powered Base Building data centers for around US$557.3 million, or around S$774.2 million, the filing said.

In addition, the two will enter into a joint venture with Digital Realty, a U.S.-listed REIT, to co-invest in three existing Digital Realty Turn-Key Flex hyper-scale data centers for around US$810.6 million, or around S$1.13 billion, the filing said. The Singapore joint venture will hold an 80 percent interest in the Turn-Key portfolio, the filing said.

Hiew Yoon Khong, group CEO of Mapletree, said the deal marked its second portfolio acquisition in North America.

“Our strategic collaboration with a leading global provider of data center solutions like Digital Realty will enable us to scale up meaningfully in developed economies for this resilient asset class,” Hiew said in the statement.

A. William Stein, CEO of Digital Realty, said tying up with Mapletree and Mapletree Infrastructure Trust would enable his company to expand its sources of capital funding.

“This transaction also underscores the attractiveness of high-quality hyper-scale data centers anchored by investment grade tenants. We look forward to working with the Mapletree Group to explore more opportunities worldwide,” Stein said in the statement.

The acquisition will be funded by a combination of equity and debt financing, including external onshore loans, Mapletree Industrial said.

On a pro forma basis, assuming the deal was completed on 1 April 2018 and including the issue of new units, Mapletree Industrial Trust’s distribution per unit would have been 12.58 Singapore cents, compared with the reported 12.16 Singapore cents, the trust said.

All of the properties are fully leased to nine established tenants, with a long weighted average lease to expiry of 9.1 years by gross rental income, and around 92.2 percent of the leases have fixed annual rental escalations of 2 percent or more, the statement said.

Six of the properties are in Northern Virginia, which is the world’s largest data center market, while the remainder are in the top-10 North American data center markets, the filing said, citing research from 451 Research. One property is located in Canada and the others are in a total of six U.S. states, the filing said.

The Turn-Key portfolio joint venture is expected to be completed late this year, while the Powered Shell portfolio acquisition is expected to be completed in early 2020, the statement said.

Digital Realty will continue managing the three Turn-key Flex hyper-scale data centers and will also manage the 10 Powered Base Building data centers for a one-year transition period, the filing said.

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