Digital Realty has been named in press reports from Bloomberg noting that the company is potentially exploring an initial public offering (IPO) in Singapore for ~$1bn of its global data center assets. Initially, Digital Realty would sell a $300m to $400m stake in ~10 data centers, with execution prior to year-end 2021. Indeed, this notion gains further credibility from the significant demand that Singapore REITs Mapletree, Ascendas Reit, and Keppel DC REIT have show for international data center assets.
Last month, Bill Stein, Digital Realty’s CEO, noted that recent data center M&A activity “demonstrates the depth in demand for data centers as an asset class, particularly in the Singapore market”. Specifically, Singapore REITs Mapletree and Ascendas Reit (CapitaLand) have accounted for 3 of the largest 15 data center M&A transactions over the past two years. At the same time, Keppel DC REIT, another Singapore REIT, has been amassing a sizeable international presence, particularly in Europe.
Singapore REITs – Assets Under Management (December 31, 2020)
Digital Realty is acutely aware of the data center demand in Singapore. Indeed, the company has been the seller in two recent transactions, with both Mapletree and Ascendas Reit.
Below we outline the recent overseas data center investment activity from Mapletree, Ascendas Reit, and Keppel DC REIT. Importantly, these Singapore REITs highlight the strong demand from Singaporean institutional investors for international data center assets like Digital Realty’s, particularly in the United States and Europe.
Mapletree Industrial Trust (including Mapletree Investments)
Mapletree Industrial Trust explicitly notes in its investment mandate that it has a focus on data centers worldwide beyond Singapore. To this end, the firm has aggressively grown its data center portfolio. Mapletree’s portfolio will comprise 57 facilities in North America, once all of its pending acquisitions close.
United States Data Center Portfolio – Sila Realty
In May 2021, Mapletree Industrial Trust agreed to acquire 29 data centers located in 18 states across the United States from Sila Realty Trust for $1.3bn.
Richmond, Virginia Data Center – Longships Capital
In March 2021, Mapletree Industrial Trust agreed to acquire a Bank of America-anchored data center in Richmond, Virginia for $207.8m.
North American Data Center Portfolio – Digital Realty
In September 2019, Mapletree Investments and Mapletree Industrial Trust entered into a transaction for 13 data centers with Digital Realty. Specifically, Singapore-based Mapletree acquired 10 data centers and formed a joint venture with Digital Realty on 3 facilities for $1.4bn.
Ascendas Reit (CapitaLand)
Ascendas Reit recently made a pivot to extend its data center portfolio beyond Singapore. Moreover, the company is enlarging its exposure to the data center asset class. Currently, data centers comprise 10% of Ascendas’ total asset value.
For Ascendas Reit, a focus on international data centers also aligns with the group’s desire to have overseas assets in developed markets account for 30% to 40% of its portfolio value over time.
European Data Center Portfolio – Digital Realty
In March 2021, Ascendas Reit agreed to acquire a portfolio of 11 data centers located across Europe from Digital Realty. Ascendas Reit, which is managed by CapitaLand, paid ~$680m for the portfolio.
Keppel DC REIT
Outside of Asia-Pacific, Keppel DC REIT owns data centers in the UK, Ireland, the Netherlands, Italy, and Germany. In contrast to Mapletree and Ascendas, Keppel’s approach to-date has been to eschew the larger data center portfolio transactions. Instead, Keppel DC REIT has assembled its European portfolio through a series of transactions, often single-asset deals.
For example, in December 2019, Keppel agreed to acquire a data center in Kelsterbach (Frankfurt) from Maena KG, for €86.0m.
Singapore Data Center Demand – Digital Realty IPO
Institutional investors in Singapore currently have an insatiable demand for overseas assets and, in particular, data centers. An important and common shareholder supporting the data center efforts of all three of these Singapore REITs is Temasek Holdings. Specifically, Temasek Holdings’ ownership in each of these companies is as follows:
- Mapletree Industrial Trust: Temasek owns 30.9% of Mapletree Industrial Trust. Also, Temasek controls 100% of Mapletree Investments, which in turn owns another 29.2% of Mapletree Industrial Trust
- Ascendas Reit: Temasek owns 21.0% of Ascendas Reit. Additionally, Temasek controls 51% of CapitaLand, which in turn owns another 18.0% of Ascendas Reit
- Keppel DC REIT: Temasek owns 23.0% of Keppel DC REIT. Also, Temasek controls 20.4% of Keppel Corporation, which in turn owns another 20.9% of Keppel DC REIT
Overall, Digital Realty appears set to capitalize on Singapore’s voracious demand for international data centers should the company end up pursuing an IPO of select global data center assets in Singapore.
Data Center M&A – Digital Realty, Singapore REITs & More
For specific valuation metrics on these comparable transactions, check out our comprehensive list of data center precedent M&A transactions here.