SINGAPORE – Mapletree Investments Pte Ltd (“Mapletree”) and Mapletree Industrial Trust (“MIT”) are pleased to announce that they have formed a 50:50 joint venture to acquire 10 Powered Base Building® data centres (the “Powered Shell Portfolio”) from Digital Realty at a purchase consideration of approximately US$557.3 million (S$774.2 million), and to enter into a joint venture with Digital Realty to co-invest in three existing Digital Realty Turn-Key Flex® hyper-scale data centres (the “Turn-Key Portfolio”) at a purchase consideration of approximately US$810.6 million (S$1,126.1 million). The data centres are located across North America with a total transaction value of approximately US$1,367.9 million (S$1,900.3 million¹).

All properties are 100% leased to nine established tenants, with a long weighted average lease to expiry of 9.1 years (by gross rental income)². Approximately 92.2% of leases (by gross rental income)² have fixed annual rental escalations of 2% or more. Approximately 91.5% (by gross rental income)² is derived from triple net leases whereby all outgoings are borne by tenants. Digital Realty will continue to manage the three Turn-key Flex® hyper-scale data centres and will also manage the 10 Powered Base Building® data centres for a one-year transition period.

“Partnering with leading real estate investors such as Mapletree and MIT enables us to expand available sources of capital funding while powering our customers’ digital ambitions,” said Digital Realty Chief Executive Officer Mr A. William Stein. “This transaction also underscores the attractiveness of high-quality hyper-scale data centres anchored by investment grade tenants. We look forward to working with the Mapletree Group to explore more opportunities worldwide.”

The transaction advances Digital Realty’s objective of self-funding its growth and diversifying its sources of equity capital. In addition, the transaction shrinks the size of Digital Realty’s asset base and sets the stage for an acceleration in its growth profile as the proceeds are redeployed into data centre investment opportunities.

The 13 properties encompass 2.1 million square feet of total net lettable area on predominantly freehold land strategically located in key markets, with six properties concentrated in Northern Virginia, the world’s largest data centre market. The remaining properties are primarily located in the top 10 North American data centre markets³, which represents about 34% of the global insourced and outsourced data centre market (by net operational sq ft). The global insourced and outsourced data centre space is expected to grow at a compound annual growth rate of 4.9% from 2017 to 2023F³. Growth in data consumption and storage as well as cloud computing continues to drive the demand for data centre space.

Mr Hiew Yoon Khong, Group Chief Executive Officer of Mapletree, said, “We have deepened our presence in the fast-growing data centre sector with our second portfolio acquisition in North America. This portfolio acquisition adds high-quality properties in key data centre markets underpinned by global cloud and colocation players. Our strategic collaboration with a leading global provider of data centre solutions like Digital Realty will enable us to scale up meaningfully in developed economies for this resilient asset class.”

Mr Tham Kuo Wei, Chief Executive Officer of Mapletree Industrial Trust Management Ltd., as manager of MIT, said, “The proposed transactions will enhance the sustainability of MIT’s returns to Unitholders with the increased freehold land component and long leases with embedded rental growth. This transaction and partnership with Digital Realty marks another significant milestone in expanding our presence in a sector with strong growth prospects.”

The Turn-Key Portfolio joint venture is expected to be completed in late 2019 while the Powered Shell Portfolio acquisition is expected to be completed in early 2020.

¹ Based on the exchange rate of US$1.00 to S$1.38927.
² Based on proforma gross rental income of Mapletree and MIT’s 100% interest in the Powered Shell Portfolio and 80% interest in the Turn-key Portfolio as at 1 April 2020.
³ Source: 451 Research, LLC., 1Q 2019.