Mapletree Industrial Trust Adds to Data Center Portfolio with $1.32B Planned Acquisition in U.S., Including Bay Area Properties

Mapletree Industrial Trust Management, Chicago, Houston, Los Angeles, San Jose, Sunnyvale, Rancho Cordova

(EDITOR’S NOTE: Data Centers in the Bay Area are located at 400 Holger Way, San Jose, which sold for $51.1 million; 1400 Kifer Road, Sunnyvale, which sold for $55 million; 11085 Sun Center Drive, Rancho Cordova; and 3065 Gold Camp Drive, Rancho Cordova. The prices of the Rancho Cordova properties have not yet been disclosed.)

20 May 2021 – Mapletree Industrial Trust Management Ltd., as manager (the “Manager”) of  Mapletree Industrial Trust (“MIT”), is pleased to announce thatMIT has entered into a purchase  and sale agreement to acquire 29 data centres located across 18 states in the United States  (the “New Portfolio” or “Properties”) at a purchase consideration of US$1,320.0 million  (approximately $1,782.0 million) (the “Proposed Acquisition”) from Sila Realty Trust, Inc..  

Mr Tham Kuo Wei, Chief Executive Officer of the Manager, said, “This portfolio acquisition will  enable us to scale up our data centre presence significantly and diversify our footprint across  key markets in the United States. Data centres remain resilient with attractive growth  opportunities, which are underpinned by the acceleration of digitalisation, cloud adoption and  e-commerce during the pandemic. The New Portfolio will augment MIT’s portfolio with the  increased freehold land component and long leases with embedded rental growth.” 

Expands Presence in a Resilient and Fast-Growing Asset Class 

As the world’s largest and most established data centre market, United States accounted for  about 28.7% of the global insourced and outsourced data centre spac2. Post-acquisition, MIT  will have presence in 13 of the top 15 data centre markets in North America, with these markets  accounting for about 64.2% of the North American data centres (by gross rental income). 

The Proposed Acquisition also increases the geographical diversification of MIT’s data centre  footprint and gains exposure to new established markets – Chicago, Los Angeles and Houston.  Data centres are expected to benefit from growing demand drivers such as cloud computing  and e-commerce as well as nascent trends such as the adoption of Internet of Things and 5G.  The increased levels of remote working, video streaming and online gaming during the COVID 19 pandemic have also generated additional data centre capacity.  

Mr Tham added, “The Proposed Acquisition marks a significant milestone in our expanded investment strategy since 2017 to include data centres beyond Singapore. This is in line with  our strategic efforts to reshape the portfolio toward higher value uses. Data Centres will  increase to 53.6% of MIT’s assets under management from 41.2% as at 31 March 2021.”  

The Proposed Acquisition is aligned with the Manager’s long-term strategy of increasing its  portfolio of data centres. Upon completion of the Proposed Acquisition, MIT’s assets under  management will increase to S$8.6 billion fromS$6.8 billion as at 31 March 2021. Data Centres  will increase to S$4.6 billion from S$2.8 billion as at 31 March 2021. Post-acquisition, MIT  would be the one of the largest owners of data centres among REITs listed in Asia Pacific (by  assets under management). 

Enhances Income Stability of the Enlarged Portfolio  

The New Portfolio is 87.8% leased to 32 tenants, including Fortune Global 500 corporations, NYSE / NASDAQ-listed companies and multinational companies with investment grade  ratings. The New Portfolio has a long weighted average lease to expiry of 7.9 years, with only  1.7% leases expiring within the next three financial years. About 89.4% of leases in the New  Portfolio have annual rental escalations from 1.5% to 3.0%. They are primarily on triple net  leases with all outgoings borne by the tenants.  

With a total net lettable area of 3.3 million square feet, the 29 Properties are predominantly  sited on freehold land. Following the completion of the Proposed Acquisition, freehold properties will increase to 65.8% of the enlarged portfolio (by land area) from 55.9% as at 31  March 2021.  

The total acquisition outlay for the Proposed Acquisition is approximately US$1,345.1 million  (approximately $1,815.9 million). The Manager intends to finance the total acquisition outlay  through proceeds from an equity fund raising and debt. The Proposed Acquisition is expected  to be distribution per unit and net asset value per unit accretive to MIT Unitholders.  

The purchase consideration for the New Portfolio of US$1,320.0 million is at a discount of  approximately 1.1% to the independent valuation of US$1,335.0 million by Newmark Knight  Frank Valuation & Advisory, LLC. As one of the 29 Properties is encumbered by tenant’s purchase rights (the “Purchase Rights”) (the “Purchase Rights-Encumbered Property”), the  final aggregate purchase consideration payable to the vendor will be reduced according to a  pre-agreed amount allocated to the Purchase Rights-Encumbered Property if the existing  tenant has exercised the Purchase Rights.  

The Proposed Acquisition is expected to complete in the third quarter of 2021.  

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