Keppel DC REIT, a data center-focused real estate investment trust in Singapore, today announced that it has agreed to acquire a data center and office property, known as Waterside House, in Bracknell, United Kingdom, which is located 34 miles (55 kilometers) west of Central London, for £57.0m ($76.5m). Specifically, Keppel DC REIT is acquiring the property, which will be renamed London Data Centre, from a joint venture between Fiera Real Estate (formerly Palmer Capital) and SEDCO Capital (Saudi Economic and Development Securities Company).
Previously, in November 2016, Palmer Capital and SEDCO Capital acquired Waterside House, in Bracknell, United Kingdom for £35.2m, implying a net initial yield of 5.65%. At the time, the building was leased to Vodafone on 30-year initial term, with 22.8 years remaining (meaning a mid-2039 lease expiry).
Finally, Keppel DC REIT expects to fund the acquisition with proceeds from its recent placement and external financing. In terms of timing, the company anticipates completing the acquisition in Q1 2022.
London Data Centre – Keppel DC REIT
Keppel DC REIT’s London Data Centre is located near Bracknell’s town center on Longshot Lane (RG12 1XH). The property resides on a 4.7-acre plot of freehold land with gross floor space of 94.9k sqft.
London Data Centre’s three interlinked two-story buildings house both data center and office space, which underwent a refurbishment in 2015.
Lease Profile
Keppel DC REIT’s London Data Centre (Waterside House) is fully-leased via an existing triple-net lease, on a shell and core basis, to Vodafone. Notably, Vodafone’s lease extends until 2039, implying a remaining lease term of ~17.5 years.
Per leasing agent Cushman & Wakefield, Vodafone appears to be seeking to sub-lease ~50% of Waterside House’s total space. Specifically, Cushman indicates that the entirety of the first floor of the building, totaling 49.5k sqft, is available to sub-let. Moreover, given the size of the 49.5k sqft floor plate, the leasing agent specifies that the first floor can be sub-divided into three 15k sqft suites to accommodate tenants with smaller space requirements.
Keppel DC REIT – Portfolio Implications
Keppel DC REIT, via the acquisition of the London Data Centre in Bracknell, is expanding its portfolio to 21 data centers across Asia-Pacific and Europe. Overall, this data center will be the company’s second facility in the Greater London area and third in the UK. Particularly, Keppel DC REIT’s existing London and UK data centers are:
- GV7 Data Centre (London, England): 25.0k sqft of lettable area, 100% leased (triple-net) to a single tenant on 5.4-year WALE. Additionally, Keppel DC REIT values this facility at £37.2m
- Cardiff Data Centre (Cardiff, Wales): 79.4k sqft of lettable area, 100% leased (triple-net) to a single tenant on 9.7-year WALE. Also, Keppel DC REIT values this facility at £36.5m
Financial Implications – Post-Acquisition
Keppel DC REIT’s acquisition of the London Data Centre will have the following financial implications on the company:
- Accretion: accretive to Keppel DC REIT’s distribution per unit (DPU)
- Shell and Core Data Center Leases: increases from ~18.3% to 20.9% of assets under management (AUM)
- Leverage (Aggregate): grows from 36.4% as of September 30, 2021, to 38.2%
- Weighted Average Lease Expiry (WALE): lengthens from 7.7 years to 8.1 years
- Occupancy (Portfolio): in-line occupancy, which inches up to 98.3%, from 98.1% as of September 30, 2021
