Shion
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Digital Core Reit seeks Singapore listing
https://www.businesstimes.com.sg/companies-markets/digital-core-reit-seeks-singapore-listing
DATA Centre-focused Digital Core Reit is seeking a listing on the Singapore Exchange (SGX).
According to the preliminary prospectus which was lodged with the Monetary Authority of Singapore on Monday (Nov 22), the Reit's manager will offer more than 267 million units at US$0.88 per unit for subscription as part of an offering which will include a placement tranche and a public offer.
Nearly 253.7 million units will be offered in the placement tranche to international investors outside of the US while close to 13.4 million units will be offered to retail investors in Singapore.
Cornerstone investors for the real estate investment trust (Reit) have each also entered into separate subscription agreements at the offering price for a total of nearly 414.8 million units. Among the cornerstone investors are investment managers BlackRock and DWS Investments Australia, Eastspring Investments Singapore - the Asian asset management business of Prudential, DBS Bank, OCBC unit Lion Global Investors and Temasek unit Fullerton Fund Management Company.
Separately, sponsor Digital Realty Trust - the New York Stock Exchange-listed Reit that is the largest owner and operator of data centre providers in the world - has agreed to subscribe for over 428.8 million units at the offering price of US$0.88 apiece, assuming that the over-allotment option is not exercised.
After the completion of the offering, the total number of outstanding units will be more than 1.13 billion.
The initial public offering (IPO) portfolio will comprise 10 freehold data centres in the US and Canada with a total net lettable area (NLA) of 1.2 million square feet (sq ft).
Four of the data centres are located in the Silicon Valley, with another 3 in Northern Virginia, 2 in Los Angeles and 1 in Toronto.
Portfolio occupancy is at 100 per cent with a tenant base comprising blue-chip companies including global cloud providers, global colocation and interconnection providers, social media platforms and IT solutions providers.
Weighted average lease expiry of the portfolio stood at 6.2 years based on base rental income for the month of June or 7.7 years by NLA as at end-June. The Reit manager said there were no meaningful lease expirations in 2022 or 2023.
The initial portfolio has a total appraised valuation of US$1.4 billion or US$1.3 billion based on Digital Core Reit's 90 per cent interest in the portfolio assets.
Post-IPO, Digital Core Reit will have right of first refusal (ROFR) to a potential pipeline of over US$15 billion of data centres - both existing and under construction. Similar to the initial portfolio, the sponsor intends to co-invest in 10 per cent of each of Digital Core Reit's future acquisitions.
Digital Core REIT is expected to have an aggregate leverage of 27 per cent as at the listing date -significantly lower than its peers - giving it a debt headroom of up to US$596 million.
According to the preliminary prospectus, the manager intends to raise gross proceeds of approximately US$977 million from the offering, including the issuance of the sponsor's subscription units and the cornerstone units.
The manager also intends to draw down US$350 million of loan facilities on the listing date. Some US$1.3 billion will go towards acquisition of the initial portfolio while the remaining will be used for transaction costs.
The Reit manager has forecasted a distribution yield of 4.75 per cent for 2022 and projected a distribution yield of 5 per cent for 2023. This translates to a projected distribution per unit (DPU) growth of 5.26 per cent from forecast year 2022 to projection year 2023 and a total return of 10.01 per cent.
