Digital Core REIT Review @ 31 October 2022

Basic Profile & Key Statistics

• Main Sector(s): Industrial
• Country(s) with Assets: United States & Canada
• No. of Properties (exclude development/associate/fund): 10

Key Indicators

Performance Highlight

For 9M22, revenue, NPI and net profit attributable to unitholders are better than forecast amounts. However, distributable income is lower due to the lower distributable adjustments, no explanation is provided in this business update.

Acquisition

On 22 Sep, DCR announced the proposed acquisition of Digital Frankurt and 1215 Integrity Drive, which the acquisition action would depend on the funding scenario: Debt Funded Scenario or Equity Fund Raising Scenario. Both scenarios would be DPU accretive to unitholders and unitholders do not have to fork out funds for equity Equity Fund Raising Scenario. The EGM is expected to be held in Mid November to seek unitholders' approval.

Related Parties Shareholding

• REIT sponsor's shareholding: Above median for more than 20%
• REIT manager's shareholding: Above median for more than 20%
• Directors of REIT manager's shareholding: 0%

Lease Profile

• Occupancy: 100%
• WALE: Above median for more than 20%
• Highest lease expiry within 5 years: Above median for more than 20%; Falls in 2025
• Weighted average land lease expiry: 100% Freehold Properties

Debt Profile

• Gearing ratio: Below median for more than 20%
• Cost of debt: Above median for more than 10%
• Fixed rate debt %: Below median for more than 20%
• Unsecured debt %: 100%
• WADM: Above median for more than 20%
• Highest debt maturity within 5 years: 100% falls in 2026
• Interest coverage ratio: Above median for more than 20%

Diversification Profile

• Top geographical contribution: Below median for more than 20%
• Top property contribution: ± 10% from median
• Top 5 properties' contribution: Above median for more than 20%
• Top tenant contribution: Above median for more than 20% 
• Top 10 tenants' contribution: Above median for more than 20% 

Key Financial Metrics

• Property yield: ± 10% from median
• Management fees over distribution: Above median for more than 20%; $4.69 distribution for every dollar paid 
• Distribution on capital: ± 10% from median
• Distribution margin: ± 10% from median

Trend

* DPU in 4Q 2021 is annualized to 3 months DPU.

• Flat - NAV per Unit, Occupancy (100%), Property Yield
• Downtrend - DPU, Interest Coverage Ratio, Distribution on Capital, Distribution Margin

Relative Valuation

• Current 52 Weeks Range: 0%
• P/NAV: Below -2SD for 1y
• Dividend Yield: Above +2SD for 1y

Author's Opinion

Favorable	Less Favorable
High REIT Sponsor's Shareholding	Low Directors of REIT Manager's Shareholding
High REIT Manager's Shareholding	Concentrated Lease Expiry
100% Occupancy	High Cost of Debt
Long WALE	Low Fixed Rate %
100% Freehold Properties	Concentrated Debt Maturity
Low Gearing Ratio	High Top 5 Properties Contribution
100% Unsecured Debt	High Top Tenant & Top 10 Tenants Contributions
Long WADM	Non Competitive Management Fees
High Interest Coverage Ratio	DPU Downtrend
Low Top Geographical Contribution	Interest Coverage Ratio Downtrend
	Distribution on Capital Downtrend
	Distribution Margin Downtrend

The performance has improved slightly as compared to the previous quarter. The interest cost has increased from 2.3% in the previous quarter to 3.1%, due to low fixed-rate debt at only 50%. With regard to the customer bankruptcy at 371 Gough Road, the customer is expected to vacate the area by this year-end. The sponsor of DCR would guarantee 100% of rental payments until December 2023.

You could also refer below for more information:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and Detail of Singapore REIT

REIT Analysis - List of previous REIT analysis posts

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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.