Singapore - Mapletree Investments Pte Ltd (“MIPL” or the “Sponsor”) and Mapletree Industrial Trust (“MIT”) are pleased to announce the formation of a joint venture which entered into a conditional purchase and sale agreement through an unlisted single purpose trust, Mapletree Redwood Data Centre Trust (“MRDCT”) to co-invest in a portfolio of 14 data centres in the United States from Carter Validus Mission Critical REIT, Inc. at a purchase consideration of approximately US$750 million (S$1,020 million) (the “Proposed Acquisition”). Under the joint venture agreement, MIPL holds 60% interest in MRDCT while MIT holds the remaining 40% interest.

The 14 data centres are strategically located in established data centre markets across the United States (the “Target Portfolio” or “Properties”). These Properties are sited on freehold land² with a total net lettable area of about 2.3 million square feet (“sq ft”). With a high portfolio occupancy of 97.4%³, the Target Portfolio is leased to 15 high-quality tenants from a diverse range of industries such as telecommunications, information technology and financial services.

With a long weighted average lease to expiry (by gross rental income) of about 6.7 years³, the Target Portfolio has a well-staggered lease expiry profile, with only 1.3% leases expiring within the next three years. 97.6% of leases (by gross rental income) include fixed annual rental escalations of more than 2%, which will offer embedded rental growth. The Properties are primarily core-and-shell data centres on triple net leases whereby all outgoings are borne by tenants, which will minimise leasing and operating risks.

Mr Hiew Yoon Khong, Group Chief Executive Officer of MIPL, said, “We are pleased to extend our presence in the United States in a sector with strong growth prospects. The Target Portfolio is anchored by long leases from established tenants, including Fortune Global 500 corporations and NYSE-listed/Nasdaq-listed companies. The growth in data creation and cloud computing will continue to drive the demand for data centre space, especially in the United States, leveraging on the highly developed infrastructure and favourable business environment. The Proposed Acquisition marks another milestone in our strategy to broaden our investments into sustainable growth sectors in developed economies.”

Mr Tham Kuo Wei, Chief Executive Officer of Mapletree Industrial Trust Management Ltd., as manager (the “Manager”) of MIT, said, “The Proposed Acquisition is in line with the expansion of MIT’s investment strategy to acquire data centres worldwide beyond Singapore⁴. The contribution from data centres will increase from 6.7% to 16.0% of MIT’s portfolio⁵. The Target Portfolio with long leases on freehold land will help to improve the quality of the enlarged MIT portfolio and stability of returns to Unitholders. The joint venture with the Sponsor is a prudent and measured approach for MIT’s first overseas investment in the United States, the largest data centre market in the world.”

As the United States is the largest and most established data centre market in the world, it is underpinned by favourable underlying demand fundamentals. According to 451 Research, the United States comprises about 28.0% of the global insourced and outsourced data centre market (by net operational square feet), with the market expected to grow at a compound annual growth rate of 3.1% between 2015 and 2020. The increasing data creation and storage, growth in cloud-based applications as well as the need for local data storage continue to drive the demand for data centre services in established cities while creating interest in secondary cities.

The joint venture will enable the Manager to leverage on the Sponsor’s financial strength, local market experience and resources in the United States and ensure a smooth continuation of the operations. In addition, the remaining 60% interest in MRDCT held by the Sponsor is similarly subject to the right of first refusal granted by the Sponsor to MIT, which MIT could consider as an investment opportunity in future.

The purchase consideration of US$750.0 million for the Target Portfolio is about 3.4% lower than the independent valuation of US$776.4 million⁶ provided by Cushman & Wakefield Western, Inc., using the sales comparison and income capitalisation approach.

The Proposed Acquisition is expected to complete in the fourth quarter of 2017.

¹ Based on the exchange rate of US$1.00 to S$1.36.
² All properties are sited on freehold land, except for the parking deck (150 Carnegie Way) at 180 Peachtree, which has a remaining land lease tenure of about 38.2 years with the option to renew for 40 years (from 30 September 2017).
³ As at 30 September 2017.
⁴ Details can be found in the announcement dated 26 September 2017 titled “Expansion of Investment Strategy”.
⁵ Based on MIT’s book value as at 30 September 2017 and MIT’s total cost of the Proposed Acquisition of US$304.8 million (S$414.6 mllion).
⁶ The Target Portfolio was valued at US$776.4 million based on valuations of the Properties conducted in August and September 2017.

Selected Photographs of Largest Properties (by Net Property Income) in the Target

7337 Trade Street, San Diego

180 Peachtree, Atlanta

402 Franklin Road, Brentwood

2000 Kubach Road, Philadelphia