Mapletree Industrial Trust Management Ltd., as manager of Singapore-based Mapletree Industrial Trust (MIT), has announced the acquisition of a newly built data center in Osaka, Japan through the purchase of the trust beneficial interest at a purchase consideration of JPY 52 billion ($370 million).

Under the conditional trust beneficial interest purchase and share agreement with Suma Tokutei Mokuteki Kaisha, an unrelated third party vendor, MIT will be acquiring an effective interest of 98.47 percent in the property, Mapletree Industrial Trust Management said in a statement on Thursday.

“The proposed acquisition offers a strategic opportunity to diversify our data center presence into Japan, one of the most developed data center markets in Asia Pacific,” said Tham Kuo Wei, Chief Executive Officer of Mapletree Industrial Trust Management.

According to him, the acquisition will enlarge the firm’s presence in the resilient data center sector, which continues to offer attractive growth prospects.

He said the addition of a high quality data center with its long-term lease to an established data center operator will provide a stable income stream and strengthen MIT’s tenant base.

With over 3,000 megawatts (MW) of total information technology (IT) load, Mapletree Industrial Trust Management opined that Japan is the third largest and one of the most developed data center markets in Asia Pacific.

It noted that the Japanese data center market is primarily concentrated in Greater Tokyo and Greater Osaka.

It also said demand for data center space in Greater Tokyo and Greater Osaka remain strong with take-up rates forecasting to grow at a compound annual growth rate (CAGR) of 13 percent and 14 percent from 2023 to 2027 (estimated) respectively.

This is underpinned by existing demand drivers such as cloud computing, online gaming, video streaming and digitalization.

In addition, data centers in Japan are expected to benefit from nascent trends with growth potential such as deployment and adoption of 5G services, Internet of Things, and artificial intelligence.

Such secular tailwinds have been amplified in the recent years from behavioural shifts brought about by the COVID-19 pandemic.

These will in turn support the growth of the resilient data centre sector.

Meanwhile, the multi-storey downtown Osaka Property is in close proximity to the prime central business district.

The property is also located close to key network hubs in Osaka, which host multiple internet exchanges as well as offer dense connectivity and low latency to the bulk of internet traffic in Osaka.

The demand for Greater Osaka market is forecasted to grow at a CAGR of 14 percent from 2023 to 2027 (estimated) to reach over 400MW of total IT absorption.

With the growth of cloud computing, hyperscale cloud service providers will require more distributed capacity to ensure redundancy.

In addition, Osaka has experienced keen interest from hyperscale cloud service providers as an alternative hub to Tokyo.

These will in turn drive the demand for data centre space in Osaka.

According to the statement, the proposed acquisition will diversify MIT’s portfolio geographically.

Post-acquisition, Japan will account for about 5.5 percent of the MIT’s portfolio (by assets under management [AUM]), with North America and Singapore representing the remaining 47.6 percent and 46.9 percent respectively.

“We have reached another milestone in our portfolio rebalancing efforts with this accretive acquisition,

“We will continue to pursue transactions in dynamic new markets beyond North America and Singapore and explore divestments of non-core assets to further improve portfolio resilience and growth prospects,” Tham added.

Upon completion of the proposed acquisition, MIT’s portfolio will grow from S$8.8 billion (by AUM) as at 31 March 2023 to SGD 9.3 billion ($6.5 billion).

Its data centers portfolio will also increase from 53.7 percent of MIT’s portfolio (by AUM) as at March 31, 2023 to 56.3 percent.

Data Centers in North America, Japan and Singapore will account for 47.6 percent, 5.5 percent and 3.2 percent of the enlarged portfolio’s AUM.

The fully-fitted property is fully leased to an established data center operator with a weighted average lease to expiry (WALE) of about 20 years (by gross rental income [GRI]).

The addition of this property will strengthen MIT’s relationship with an existing data center tenant.

It is leased on a net lease structure with minimal landlord operational obligations.

The property is progressively fitted out over four phases with the first phase completed in November 2022.

With a net lettable area of about 136,900 square feet, the property has a 70-year land lease commencing from October 1, 2020.

Following the completion of the proposed acquisition, the weighted average unexpired lease term for underlying leasehold land for MIT’s portfolio will increase from 35.3 years as at March 31, 2023 to 35.4 years.

MIT’s portfolio WALE is also expected to increase from 3.9 years as at March 31, 2023 to 4.5 years.

The manager intends to finance the total acquisition through a combination of debt and proceeds from an equity fund raising.

The proposed acquisition is expected to complete by the third quarter of 2023.

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