Digital Core Reit bags 10-year lease at US facility, raises portfolio occupancy to 98% from 81%
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The Linton Hall facility is expected to generate US$13.3 million in annualised net property income, based on the REIT’s 90 per cent share of the property.
PHOTO: DIGITAL CORE REIT MANAGEMENT
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SINGAPORE - Digital Core Reit announced on Jan 5 that it has reached a 10-year agreement with an investment-grade global cloud-service provider to occupy its vacant Linton Hall facility in Northern Virginia, an affluent region just outside Washington, known for its history and tech industry.
This will raise the portfolio occupancy of the pure-play data centre real estate investment trust (Reit) to 98 per cent, up from 81 per cent, said the mainboard-listed Reit.
The agreement for the 10.8MW facility is expected to generate about US$14.8 million (S$19 million) in annualised net property income, or US$13.3 million based on the Reit’s 90 per cent share of the property. This represents a 35 per cent increase over its previous net rent, the Reit manager said.
The Reit previously reported a net property income of US$67.7 million for the nine months ended Sept 30.
The agreement commences on Dec 1. From then, the annualised rent contribution from investment-grade customers will go up to 82 per cent, from 79 per cent. The total portfolio weighted average lease expiration will be extended to 5.7 years, from 4.7 years currently.
Mr John Stewart, chief executive of Digital Core Reit’s manager, said in a media briefing that the deal excludes tenant improvements, brokers from either side, leasing commission, rent-free periods and break clauses.
He pointed out that the tenant will bear all of the fit-out costs; the agreement also includes a 3 per cent annual rental escalation clause with a no-break option for the tenant over the 10-year term.
Digital Core Reit will invest about US$40 million in capital expenditure for redevelopment, which adds 13 per cent to the facility’s sellable capacity to 10.8MW, he added.
Describing the deal as a “strategic reset”, he noted that the Linton Hall facility would account for 10 per cent of the Reit’s revenue.
The facility has been sitting vacant since the previous tenant moved out of the facility on June 30, he added.
Responding to queries from The Business Times, Mr Stewart said that the Reit seeks to continue delivering organic growth, particularly through its two assets in Los Angeles, California.
“We have two co-location facilities in Los Angeles, where we have both some existing vacancy and some opportunity to replicate our model by densifying or investing in the facility and bringing on a little bit of additional sellable capacity,” he said.
Based on its portfolio summary, the weighted average occupancy of Digital Core Reit’s Los Angeles portfolio stood at 90.5 per cent as at Sept 30. However, the Reit is not ruling out inorganic growth through acquisitions. Mr Stewart pointed out that it has US$15 billion in its acquisition pipeline from its sponsor, Digital Realty.
“We certainly have opportunities to invest and acquire, generate inorganic growth through acquisitions,” he said.
The counter had announced a trading halt on Jan 2, before the announcement. Units of Digital Core Reit closed 1 US cent lower at 53.5 US cents on Jan 6, after rising 6.9 per cent to 54.5 US cents on Jan 5. THE BUSINESS TIMES
