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Keppel DC Reit expanded its presence in Europe with the acquisition of a data centre in Milan, Italy for EUR 37.3 million (approximately S$57.3 million).
Sited on 11,965 sq m freehold land, the data centre comprises three interconnected four-storey buildings and is about eight kilometres away from the Milan city centre.
With a total lettable area of around 15,365 sq m (165,389 sq ft), the facility is fully leased to a telecommunications company on a double-net lease structure which only expires in December 2027 (with option to extend for another six years), said Credit Suisse.
It noted that the annual step ups are “in the similar two to four percent range as KDC REIT’s existing portfolio and the tenant will manage the facility, own the fit-outs and bear the opex and capex for the mechanical and electrical equipment.”
The acquisition is expected to be accretive to Keppel DC REIT’s Distribution Per Unit and will enhance its income stream stability through geographical diversification.
Notably, the transaction is at a cap rate of 6.5 percent which is lower compared to KDC REIT’s recent maincubes (Germany) acquisition at 7.2 percent, said Credit Suisse.
Set for completion in 2018, maincubes Data Centre is under construction by the vendor in Germany.
The portfolio’s weighted average lease expiry (WALE) will also be lengthened from 8.7 years to 9.3 years, while the REIT’s portion of master-leased facilities will be increased.
Fully funded by debt, the acquisition is expected to be completed in Q3 2016. Upon completion, the aggregate leverage of Keppel DC Reit is expected to increase from 29.1 percent to around 32.5 percent.
Excluding maincubes Data Centre, assets under management is also set to increase to approximately S$1.13 billion with aggregate lettable area of about 70,912 sq m (763,298 sq ft) across 10 data centres.
With this, Credit Suisse gave Keppel DC Reit an outperform rating.
Trading at a yield of 5.9 percent, the Reit’s existing operations have remained resilient with potential for occupancy improvements going forward, it said.
“We believe KDC REIT offers the strongest inorganic growth potential amongst the REITs under our coverage.”
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