Allied Properties Real Estate Investment Trust (REIT) has completed the sale of its Toronto data centres to the Japanese telecommunications company, KDDI Corporation. The CAD $1.35 billion deal involves three downtown properties at 905 King Street West, 151 Front Street West and 250 Front Street West and strengthens KDDI’s presence in North America.

The company, which has now established the Canadian subsidiary, KDDI Canada Inc., is targeting a larger share of the global interconnection data centre market in facilities that provide synergistic space for content providers, cloud services and telecommunications carriers. KDDI currently owns and operates interconnection data centres in London and Paris, and opened a new data centre in Bangkok earlier this year.

“Through this agreement, the company will acquire Canada’s top interconnection data centre and strengthen its data centre business in North America to promote its business on a global scale,” states a release from KDDI Corporation.

Allied plans to use about $1 billion of the proceeds for various loan repayments with the balance tapped for “development and upgrade activity” throughout 2023 and 2024. There will also be a special distribution to unitholders of record as of December 31, 2023.

In announcing the recent completion of the transaction, the REIT underscores that the deal does not include its 2.5-acre downtown Toronto site at 20 York Street, which is zoned for 1.3 million square feet of urban workspace. The REIT’s statement also confirms that it is nearing the completion of a large-scale, multi-year development and upgrade program and does not plan any subsequent activity in the near term.

“The sale of the (data centre) portfolio enables Allied to reaffirm its mission and to pursue continued growth in NOI and IFRS value in a more focused and prudent manner, “ it maintains. “Allied has a favourable debt-maturity schedule and an unencumbered, income-producing portfolio valued in excess of $8.4 billion.”