The manager of Ascendas Real Estate Investment Trust (A-REIT) has announced a proposed acquisition of a portfolio of 11 data centres located across Europe from subsidiaries of Digital Realty Trust, Inc. for a total consideration of $904.6 million.
Four of the data centres are located in the UK, three are located in the Netherlands and France respectively, while the remaining centre is located in Switzerland. Net lettable area for the entire portfolio totals 61,637 square meters.
The total acquisition cost of S$960.0 million (inclusive of transaction costs of $55.4 million and fees payable to the manager of $9 million), will be financed with proceeds from the REIT’s $1.2 billion equity fund raising in November 2020, debt financing and/or internal cash resources.
The acquisition will increase A-REIT's investment in data centres from $0.5 billion as of December 31, 2020, up to $1.5 billion, representing 10% of A-REIT’s total investment properties of $15 billion.
According to a press release dated March 17, the manager states that the acquisition enlarges A-REIT’s exposure to the resilient data centre asset class, with demand for data centres expected to grow due to increasing reliance on data and online applications as well as accelerating digitisation across industries.
In addition, the acquisition is expected to diversify A-REIT’s portfolio geographically. Post-transaction, 60% of its investment properties are Singapore, 14% in the US, 14% in Australia and 12% in the UK and Europe. It will also strengthen the REIT’s proportion of freehold land by value from 35.4% to 37.5%.
The manager also notes that the new properties have a long weighted average lease expiry of 4.6 years by rental income, with about 83% of the leases (by rental income) embedded with annual rent escalations of between 1.0% to 3.0%.
The acquisition is financed by $612 million out of the $1.2 billion in raised last year, and the remainder by debt and/or internal resources. Aggregate leverage rises from 32.8% as at Dec 31, 2020 to a pro forma of 37.1%.
Net property income yield for the first year is estimated at approximately 6.0% and 5.7% pre-transaction costs and post-transaction costs respectively. Based on FY2020 ending December 2020 earnings, the pro forma impact of the acquisition is an improvement of 0.189 cents, assuming the acquisition was completed on January 1, 2020.
William Tay, executive director and CEO of the manager says the acquisition gives A-REIT the unique opportunity to own a portfolio of well-occupied data centres located across key markets in Europe.
“We see good potential in the data centre business and will continue to source and make further acquisitions when the opportunities arise,” he adds.
Shares in A-REIT closed up 4 cents or 1.38% higher at $2.95 on March 16.
