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REITs investing & personal finance

Thursday, December 02, 2021

Digital Core REIT IPO - Fundamental Summary from IPO Prospectus

Less than a week after Daiwa House Logistics Trust was listed, there is another REIT - Digital Core REIT (DCR) lodged its IPO prospectus. Let's summarize the IPO prospectus info as per the previous IPO posts: 

  • Offering Price: US$ 0.88 (S$ 1.21)
  • Offering Units: 267.034 million 
  • Indicative Dividend Yield: 4.75%
  • NAV per Unit:  US$ 0.84
  • P/NAV: 1.05
  • Shares Outstanding: 1,125.357,387 units
  • Market Cap: US$ 990.31 million
  • Dividend Policy: Semi-Annually; Distribution would be 100% of distributable income from listing date to end 2023. Thereafter, would be at least 90% of distributable income.

Related Party Shareholding
  • Sponsor: Digital Realty Trust, L.P.
  • Sponsor Shareholding: 33.3% or 38.1% subjected to whether over-allotment is exercised. 
  • Manager Shareholding: 1.3%
  • Directors of REIT Manager Shareholding: No Info

Lease Profile

  • Number of Properties: 10 Units
  • AUM: US$ 1.44 billion
  • Occupancy: 100%
  • Income in SGD/Major Currencies: 100%
  • WALE by GRI: 6.2 years (as of June 2021)
  • Highest Lease Expiry in Single Year by GRI: 61.9% falls in 2025 to 2029, without breakdown
  • Weighted Average Land Lease Expiry: 100% Freehold

Debt Profile

  • Gearing Ratio:  27%
  • Cost of Debt: 1.4%
  • Fixed Rate Debt %: 0%
  • Unsecured Debt %: 100%
  • WADM: 5 years
  • Highest Debt Maturity in Single Year: 100% falls in 2026
  • Interest Coverage Ratio: 11.3 (Estimated)

Diversification Profile

  • Top Sector Contribution by GRI: 100% Data Centre
  • Top Geographical Contribution by GRI: 38%
  • Top Property Contribution by NPI: 23.8%
  • Top 5 Properties Contribution by NPI: 76.8%
  • Top Tenant Contribution by GRI: 35.9% 
  • Top 10 TenantS Contribution by GRI: 99.95% 

Key Financial Metrics

  • Property Yield: 4.6% (based on 2022 forecast)
  • Management Fees over Distribution: 20.1% (based on 2022 forecast)
  • Distribution on Capital: 3.7% (based on 2022 forecast)
  • Distribution Margin: 44.9% (based on 2022 forecast)

Author's Opinion

FavorableLess Favorable
High Sponsor Shareholding0% Fixed Rate Debt %
High Manager ShareholdingConcentrated Debt Maturity
High OccupancyHigh Top Property & Top 10 Properties Contributions
Long WALEHigh Top Tenant & Top 10 Tenants Contributions
100% Freehold PropertiesNon-Competitive Management Fees
Low Gearing RatioLow Distribution Margin
Low Cost of Debt 
100% Unsecured Debt 
Long WADM 
High Interest Coverage Ratio 
Low Top Geographical Contribution
The sponsor of DCR is Digital Realty Trust, a REIT listed in United States, which is the largest owner and operator of data centres globally. Digital Realty Trust has a huge market cap at US$ 46 Billion, and it is ranked 6th largest U.S. REIT. Well, have to say it is really new to see a REIT sponsoring another REIT. 

For those who like to know more, you could download the prospectus here. Below is the timetable if one is interested to apply for it, the deadline is today 12pm.

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*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee accuracy, completeness, and reliability. It should not be taken as financial advice or a statement of fact. I shall not be held liable for errors, omissions and loss or damage as a result of the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.

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