Mapletree Redwood Data Centre Trust: Mapletree Industrial Trustto Acquire Remaining 60% Interest in 14 Data Centres in the United States

Jun 23, 2020 | Posted by Eric Bell

SINGAPORE: DBS Trustee Limited, a trustee of Mapletree Industrial Trust (MIT), has entered into agreements for the proposed acquisition of the remaining 60% interest in the 14 data centres in the United States of America currently held by Mapletree Redwood Data Centre Trust (MRDCT) at a purchase consideration of $210.9 million.

The agreed property value of the 14 data centres on a 60% basis is $494 million. MIT holds a 40% interest in MRDCT, with Mapletree DC Ventures Pte. Ltd., a wholly-owned subsidiary of Mapletree Investments Pte Ltd, holding the remaining 60% interest.

Upon completion of the Proposed Acquisition, MIT will hold a 100% interest in the 14 data centres. Mapletree intends to finance the total acquisition outlay through the proceeds from an equity fund raising and the issuance of the acquisition fee in units. The proposed acquisition is expected to be distribution per unit and net asset value per unit accretive to MIT Unit holders

Tham Kuo Wei, Chief Executive Officer of the Manager, said, “The Proposed Acquisition increases our exposure to the resilient data centre segment and deepens our presence in the United States. The United States is the largest and most established data centre market in the world. It offers attractive growth prospects and is well supported by favourable supply demand dynamics. The Proposed Acquisition will improve MIT’s income stability with the increased freehold land component and long leases with annual rental escalations.”

The proposed acquisition is in line with the Mapletree’s ’s strategy to grow the Hi-Tech buildings segment. Upon completion of the Proposed Acquisition, MIT’s assets under management will increase to S$6.6 billion from S$5.9 billion as at 31 March 2020.

MIT’s Data Centres segment is expected to increase to 39.0% from 31.6% as at 31 March 2020, which increases MIT’s exposure to a resilient asset class with growth opportunities. The Hi-Tech Buildings segment will account for about 59.9%, as compared to 55.0% as at 31 March 2020.

According to 451 Research, the global insourced and outsourced data centre market is projected to grow at a compound annual growth rate of 2.2% from 2018 to 2024F, with the United States accounting for about 28% of the global market.

Growth in data creation and storage as well as cloud computing continues to drive the demand for data centre space. Data centres had demonstrated to be a resilient asset class during the COVID-19 pandemic as it was identified as essential infrastructure in North American and had remained open during the lockdown period. The pace of cloud adoption from the increased usage of remote working, video streaming and online gaming is expected to intensify, which will underpin the demand for data centre space.

All 14 data centres are 97.4% leased to 15 established tenants, including Fortune Global 500 corporations and NYSE-listed/Nasdaq-listed companies. The MRDCT Portfolio has a weighted average lease to expiry of about 4.6 years, with about 20% of the leases expiring within the next three years. About 97.8% of the MRDCT Portfolio have annual rental escalations of 2% and above. They are primarily powered shell data centres on triple net leases with all outgoings borne by the tenants.