Digital Core Reit eyes data centres in US, Germany to grow presence

Digital Core Reit is planning to acquire two data centres in Frankfurt and Dallas, the Singapore-listed data centre real estate investment trust said on Thursday.

The proposed move is expected to help the Reit establish a presence in top-tier global data centre markets, with Frankfurt being the second-largest data centre market in Europe and Dallas being the fifth-largest data centre market in North America.

If successful, the move is expected to be distribution per unit (DPU) accretive by up to 3.1 per cent, depending on whether the Reit is able to clinch majority interest in both properties.

DPU is the amount of dividends an investor receives for every unit he has in the Reit.

Digital Core Reit said the acquisition could go in one of two ways.

The first would be to raise enough equity to finance the much larger deal of acquiring an 89.9 per cent interest in the Frankfurt facility and a 90 per cent interest in the Dallas data centre, with a total acquisition cost of US$700 million (S$993 million).

In the event the equity fund-raising is unsuccessful, Digital Core Reit will then only acquire a 25 per cent interest in the Frankfurt facility for US$146 million, which will be funded by debt.

The debt-funded transaction is expected to be approximately 2 per cent accretive to DPU, while the equity fund-raising scenario is expected to be approximately 3.1 per cent accretive.

Digital Core Reit Management chief executive John Stewart said the bigger deal would be preferable, given the size, scale, and diversification it would bring to the table.

He added: "If we're able to raise equity at an attractive valuation, then I think the bigger deal does a lot for us. But we're also committed to long-term value creation, and we stated that we don't intend to dilute unit holders. If the markets don't cooperate, then we'll do the smaller deal."

Mr Daniel Tith, chief financial officer for the Reit, said the earliest that the acquisition deal can be completed would be the end of November or early December, after an extraordinary general meeting in the later part of this year where the deal will be subjected to approval by unit holders.

Both built by Digital Realty, the Frankfurt property is valued at approximately US$558 million, while the Dallas property is valued at about US$199 million.

Digital Core Reit raised close to US$1 billion during its initial public offering on the Singapore Exchange in 2021. It was the largest listing in Singapore last year.

The Reit is sponsored by Digital Realty Trust, the largest owner, operator, developer and acquirer of data centres globally, with a portfolio of 290 properties. It has more than 4,000 customers, including Facebook, IBM and Oracle.

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A version of this article appeared in the print edition of The Straits Times on September 23, 2022, with the headline Digital Core Reit eyes data centres in US, Germany to grow presence. Subscribe