Ascendas REIT to tap into European market with 11 data centre acquisitions for $904.6M
Published 17 March 2021
Ascendas Real Estate Investment Trust’s manager plans to acquire 11 data centres across Europe from subsidiaries of Digital Realty Trust, for about $904.6 million.
Ascendas REIT will finance it by $612 million out of the $1.2 billion raised last year, and the remainder by debt and internal resources, the company said.
The move complements Ascendas REIT’s existing data centre portfolio in Singapore and will increase the sector’s contribution to $1.5 billion, from $0.5 billion as of December 2020, accounting for 10% of investment properties under management of $15 billion. Net property income yield for the first year is approximately 6.0 per cent and 5.7 per cent pre-transaction costs and post-transaction costs respectively.
“This acquisition gives us a unique opportunity to own a portfolio of well-occupied data centres located across key markets in Europe,” said William Tay, executive director and chief executive officer of the Ascendas Funds Management (S) Limited, manager of Ascendas REIT.
As the European data centre markets are recording strong capacity growth driven by robust take-up levels, the announcement noted that 93 per cent of the target portfolio is located in key European data centre markets and 97.9 per cent is occupied by 14 high-quality and established customers.
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. All of which will benefit from being close to large population centres and have the connectivity and infrastructure to attract the data centre providers.
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 per cent of the leases (by rental income) embedded with annual rent escalations of between 1- 3 per cent.
“We see good potential in the data centre business and will continue to source and make further acquisitions when the opportunities arise,” said Tay.
The proposed plan will enlarge Ascendas Reit’s exposure to the resilient data centre asset class as accelerating digitisation across industries boosts the demand for data centres. Once complete, Ascendas Reit’s portfolio will be geographically diversified, with 60 per cent of investment properties in Singapore, 14 per cent in the U.S., 14 per cent in Australia and 12 per cent in the U.K.