Southern Steel signs RM33m data centre tenancy for Penang steel plant
Southern Steel Bhd has signed a conditional three-year tenancy agreement with Deep Source (PN) Sdn Bhd for data centre use of its steel plant in Seberang Perai Tengah, Penang. The lease carries a total rent of RM33.02 million over the term, subject to regulatory approvals.
PETALING JAYA (Oct 5): Southern Steel Bhd has signed a conditional three-year tenancy agreement with Deep Source (PN) Sdn Bhd for proposed data centre use of its existing steel plant and surrounding premises in Seberang Perai Tengah, Penang.
The agreement, signed on Oct 1 and disclosed in a Bursa Malaysia filing on Friday (Oct 2), carries a monthly rent of RM917,250, equivalent to RM11.01 million annually and RM33.02 million over the full three-year term. It covers 6.29513 hectares of leasehold land in Mukim 01, together with existing buildings, structures, fixtures and improvements.
The tenancy is subject to Southern Steel obtaining consent from the Penang State Authority and Penang Development Corporation (PDC) for the rental, use of the existing steel plant as a data centre and, where applicable, construction of buildings or structures on the land. Other corporate and regulatory approvals required for the tenancy must also be obtained. The conditions must be fulfilled within 90 days of the agreement, unless both parties agree to extend the period. The three-year tenancy will begin upon delivery of vacant possession, which will occur within 14 days after the final condition is fulfilled.
Deep Source provides hosting infrastructure and data processing services. It is wholly owned by Deep Source Holdings Ltd, which is listed on the Main Board of the Hong Kong stock exchange. Southern Steel said Deep Source Holdings and its controlling shareholder You Zhenhua are indirect substantial shareholders of the steelmaker through their respective interests in Green Esteel Pte Ltd, which holds a 50.10% stake in Southern Steel. Chairman Seah Kiin Peng and director Zhang Cheng, both Green Esteel nominees, abstained from all board deliberations and voting on the transaction.
Independent valuer CBRE WTW Valuation & Advisory Sdn Bhd assessed the premises’ overall market rental at RM1.35 per sq ft a month over the total land area, based on prevailing rents for comparable buildings and land. The premises comprise nine title interests, all owned by Southern Steel except HSD 37943, PT 3057, which belongs to its wholly owned subsidiary Southern Steel Properties Sdn Bhd. The subsidiary has authorised Southern Steel to include the parcel in the tenancy.
Southern Steel said the tenancy is “not regarded as a related party transaction” under paragraph 10.08(11)(h) of Bursa Malaysia’s Main Market Listing Requirements and does not require shareholder approval. The company added that the agreement is expected to provide consistent revenue and cash flow throughout the tenancy term and contribute positively to the group’s financial results.
