Keppel DC REIT and Keppel Ltd. (Keppel) have indirectly entered into agreements with unrelated third-party sellers, to collectively acquire 90 percent effective interests in Tokyo Data Center 4 and Tokyo Data Center 5, two freehold, hyperscale fully-fitted (colocation) data centers located in Inzai City, Greater Tokyo, Japan, for JPY 190 billion ($1.19 billion).

Upon completion, Keppel DC REIT will hold an 88.62 percent effective interest in each data center, while Keppel, through its interest in Keppel Japan KK, will hold a 1.38 percent effective interest, Keppel said in a statement on Tuesday.

The existing operator, an established global data center owner and operator, will retain a 10 percent interest in each data center, ensuring alignment of interests and operational continuity.

The aggregate purchase consideration (on a 100% basis) is JPY 190 billion ($1.19 billion), representing an approximate 2.1 percent discount to the assets’ valuation of JPY 194 billion.

Keppel DC REIT will pay approximately JPY 168.4 billion, for its 88.62 percent effective interest in the two data centers.

The acquisition is expected to be immediately DPU accretive. On a pro forma basis, if the acquisition were completed on January 1, 2025, DPU for FY 2025 would increase by 2.6 percent from 10.381 cents to 10.649 cents.

The acquisition combines immediate DPU accretion with multiple avenues of long-term income growth. The assets benefit from contracted average annual rent escalation of approximately 2.8 percent and in-place rents are estimated to be at least 30% below prevailing market rents.

Weighted average lease expiry2 (WALE) is approximately 4.5 years for Tokyo Data Center 4 and 10.6 years for Tokyo Data Center 5, providing a balance between reversion opportunities and long term income visibility, said Keppel.

Located in Inzai City, one of Japan’s most established hyperscale data center clusters, Tokyo Data Center 4 and 5 are 100 percent occupied by four investment grade internet enterprise and information technology (IT) services clients.

The acquisition will strengthen Keppel DC REIT’s presence in one of Asia Pacific’s most attractive data center markets, increasing Japan’s contribution to portfolio rental income from approximately 9 percent as at June 30, 2026 to approximately 23 percent post-acquisition.

Keppel DC REIT’s portfolio will remain anchored in Singapore, which will account for approximately 60 percent of portfolio rental income post-acquisition.

“This acquisition demonstrates our disciplined approach to acquiring quality assets with multiple avenues for value creation. In addition to immediate DPU accretion, Tokyo Data Center 4 and 5 provide embedded growth through contracted rent escalators and meaningful potential reversion opportunities, while further deepening our exposure to the Japan data center market,

“The acquisition also expands our network of institutional and operating partners, strengthening our ability to source and access future investment opportunities globally. Together, these will support our strategy of building a resilient portfolio that can deliver sustainable long-term growth and returns across market cycles,” said Loh Hwee Long, Chief Executive Officer of the Manager of Keppel DC REIT.

Post acquisition, Keppel DC REIT’s portfolio contracted power capacity 3 will increase from
approximately 95 percent as at June 30, 2026 to approximately 96 percent; portfolio WALE by lettable area extends from 6.7 years as at June 30, 2026 to 6.8 years; and asset under management (AUM) grows from S$6.3 billion ($4.95 billion) to approximately S$7.6 billion across 27 data centers in ten countries.

Of the four investment grade clients across the two data centers, three are new to Keppel DC REIT’s portfolio, broadening its client base and reducing client concentration risk.

Following the acquisition, the top client’s contribution to portfolio rental income is expected to reduce from 43.5 percent as at June 30, 2026 to approximately 38.2 percent post-acquisition.

The manager intends to fund the acquisition through a mix of equity and JPY-denominated debt. The acquisition is expected to be completed in the fourth quarter of 2026.

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