Keppel DC REIT, Asia’s first pure-play data center Real Estate Investment Trust, is set to acquire an 88.62 percent effective interest in two freehold hyperscale data centers in Inzai City, Greater Tokyo, for JPY 168.4 billion (US$ 1.05 billion). Keppel Ltd. and Keppel DC REIT have indirectly entered into agreements with unrelated third-party sellers to acquire a combined 90 percent effective interest in Tokyo Data Center 4 and Tokyo Data Center 5.
According to a press release, the existing operator of the two facilities will retain a 10 percent interest in each center. The two assets have a combined purchase consideration of JPY 190 billion (US$ 1.19 billion) on a 100 percent basis, representing a 2.1 percent discount to their valuation of JPY 194 billion (US$ 1.21 billion). Keppel, through its interest in Keppel Japan KK, will hold the remaining 1.38 percent effective interest. The acquisition is expected to be immediately accretive to distributions per unit (DPU).
Mr. Loh Hwee Long, CEO of the manager, Keppel DC REIT, said, “In addition to immediate DPU accretion, Tokyo Data Centre 4 and 5 provide embedded growth through contracted rent escalators and meaningful potential reversion opportunities, while further deepening our exposure to the Japan data center market.”
The data centers have contracted average annual rent escalations of 2.8 percent, while their in-place rents are estimated to be 30 percent below current market rents. Tokyo Data Center 4 has a weighted average lease expiry (WALE) of 4.5 years, compared with 10.6 years for Tokyo Data Center 5.
The acquisition will increase Japan’s contribution to Keppel DC REIT’s portfolio rental income from 9 percent as of June 30, 2026, to 23 percent after completion. Singapore will continue to account for 60 percent of portfolio rental income. Following the acquisition, Keppel DC REIT’s contracted power capacity is expected to rise from 95 percent as of June 30, 2026, to 96 percent while portfolio WALE by lettable area is expected to increase from 6.7 years to 6.8 years.
Assets under management will rise from US$ 4.96 billion to US$ 5.98 billion, with the portfolio expanding to 27 data centers across 10 countries.
Both facilities are fully occupied by four investment-grade internet, enterprise and IT services clients, three of which are new to Keppel DC REIT’s portfolio and the acquisition is expected to reduce client concentration. The largest client’s share of portfolio rental income is projected to fall from 43.5 percent as of June 30, 2026, to 38.2 percent following completion. Keppel DC REIT plans to fund the acquisition through a combination of equity and JPY-denominated debt. Completion is expected in the fourth quarter of 2026.