Digital Core REIT, a Singapore-listed data center real estate investment trust, intends to acquire two data centers in Frankfurt and Dallas. With Frankfurt being the second-largest data center market in Europe and Dallas being the fifth-largest data center market in North America, this initiative is anticipated to assist the REIT in establishing a foothold in top-tier international data center markets.
Depending on whether the REIT is able to secure majority stake in both assets, the transaction is anticipated to be distribution per unit (DPU) accretive by up to 3.1% if successful. The dividend per unit (DPU) is the amount of dividends a shareholder receives from the REIT.
According to Digital Core REIT, there are two possible paths for the acquisition: the first is to raise enough stock to finance the far bigger deal of buying an 89.9% interest in the Frankfurt facility and a 90% interest in the Dallas data center, with a total acquisition cost of US$700 million (S$993 million).
However, if the equity fund-raising is unsuccessful, Digital Core REIT will only be able to purchase a 25% interest in the Frankfurt facility for US$146 million, with the remaining amount coming from debt. The equity fund-raising scenario is anticipated to be around 3.1% accretive to DPU, whilst the debt-funded transaction is anticipated to be about 2% accretive.
According to John Stewart, Digital Core REIT Management chief executive, given the size, scope, and diversification it would bring to the table, the larger deal would be preferred.
“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.” Stewart added.
Moreover, according to Daniel Tith, chief financial officer for the REIT, the acquisition agreement could be finalized as early as the end of November or the beginning of December, following an extraordinary general meeting later this year where unit holders will have to approve the deal.
Both properties were constructed by Digital Realty; the Frankfurt one is estimated to be worth $558 million while the Dallas one is worth roughly $199 million. During its first public offering on the Singapore Exchange in 2021, Digital Core REIT raised over US$1 billion. Last year, it had the biggest listing in Singapore.
The REIT is sponsored by Digital Realty Trust, which has a portfolio of 290 facilities and is the world’s largest owner, operator, developer, and purchaser of data centers. Additionally, it serves more than 4,000 clients, among them Facebook, IBM, and Oracle.
