KEPPEL DC Real Estate Investment Trust (Reit) is divesting a 100 per cent freehold interest in its Sydney data centre, Intellicentre Campus, at an agreed value of A$174 million (S$152.1 million).
Located in Macquarie Park in the north of Sydney at 17-23 Talavera Road, Intellicentre Campus comprises two data centres built in 2012 and 2021.
The property is located about 12 km away from the central business district and is said by the manager to be “well-served by major telecommunication carriers, with ample network capacity”.
On Tuesday (Apr 16), Keppel DC Reit’s manager said the agreed value represents a 35.4 per cent premium to the property’s FY2023 valuation of A$128.5 million, and is 148.6 per cent higher than the Reit’s original investment of A$70 million in the asset.
The agreed value also represents an exit capitalisation rate of about 3.6 per cent.
The buyer of the data centre is an indirect wholly-owned subsidiary of Australian-listed Macquarie Technology Group (MTG) – the parent company of the asset’s existing tenant.
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Among its clients, MTG also facilitates house data for 42 per cent of the Australian government.
Keppel DC Reit’s manager will reinvest A$90 million of the sale proceeds into an Australian data centre note that is issued by Macquarie Data Centres Group and guaranteed by MTG.
Remaining net sale proceeds will be used for repaying debt, including existing loans of about A$43.2 million linked to the Reit’s original investment in Intellicentre Campus.
Investing in the note would allow Keppel DC Reit to retain its exposure to the Australia data centre market, said the Reit manager.
The note is expected to produce an income stream starting at about A$6.3 million per year, with a consumer price index-linked annual escalation mechanism.
This would in turn mirror rental received from the divested asset had it been held by the Reit for another 8.5 years.
Both the divestment of Intellicentre Campus and Keppel DC Reit’s reinvestment in the Australian data centre note are expected to be completed no later than Q4 2024.
The transactions are collectively estimated to be 0.7 per cent accretive to the Reit’s distribution per unit (DPU).
Assuming the transactions were completed on Jan 1, 2023, pro forma DPU for FY2023 would have been S$0.09446 instead of S$0.09383.
Loh Hwee Long, chief executive of the manager, said the two transactions “present a unique opportunity for Keppel DC Reit to crystallise value from its investment in Intellicentre Campus at a highly-attractive premium”, while continuing to earn recurring income.
“Post-transactions, Keppel DC Reit remains well-positioned to pursue further growth opportunities, supported by a strong balance sheet,” said Loh.
Units of Keppel DC Reit : AJBU 0% closed S$0.02 or 1.2 per cent lower at S$1.69 on Monday.