Keppel DC REIT (KDCREIT) announced that it has entered into a share purchase agreement to acquire a data centre located at Via Bisceglie 71, 73, 75, Milan, Italy, for an agreed property price of EUR37.3m (~S$57.3m). This asset is a fourstorey freehold property with a total lettable area of 15,365 sq m and is currently leased to one of the world’s largest telecommunications companies until 31 Dec 2027.

The lease shall be renewed for an additional six-year term thereafter unless the client notifies the landlord otherwise. KDCREIT, being the purchaser, will also be granted a rent top-up for the period from the completion date or 30 Sep 2016, whichever is earlier, to 31 Dec 2018. The expected date of completion is in 3Q16. Upon completion, KDCREIT’s portfolio WALE would be lengthened further from 8.7 years to 9.3 years.

On a pro forma basis, assuming the acquisition is funded fully by debt, KDCREIT’s FY15 DPU would have increased by 2.6% from 6.51 S cents to 6.68 S cents. We maintain our BUY rating and S$1.27 fair value estimate for now.  

Source: OCBC Research - 12 Aug 2016