In the analyst’s view, DC REIT will likely acquire an additional interest of 10% given current market conditions, bringing its aggregate interest to 59.9%. The 10% acquisition will provide a distribution per unit (DPU) accretion of 1.7%. DC REIT’s net asset value (NAV) per unit would increase by 4.5% to 70 US cents (90 cents), notes UOBKH analyst Jonathan Koh. However, should market conditions improve, the REIT may acquire a 40% stake in the data centre, which will drive its DPU accretion to 7% and NAV up to 71 US cents, he adds. The REIT manager has up to 90 days to conclude the deal, which means it has up to early December this year to decide on the size of its acquisition. DC REIT will also need to hold an extraordinary general meeting (EGM) to seek unitholders’ approval.
Analysts from DBS Group Research and UOB Kay Hian (UOBKH) have maintained their “buy” calls for Digital Core REIT (DC REIT) after the REIT announced, on Sept 9, that it would exercise its option to acquire an additional interest of between 0.2% and 40% in a Frankfurt data centre. The acquisition will be fully funded by a Euro-denominated term loan at an all-in cost of 3.6%. The REIT had previously completed the acquisition of another 24.9% stake in the same data centre in April.
The additional interest is priced at an “attractive” discount of 17.8% to the facility’s valuation and the REIT’s net property income (NPI) yield of 5.7% in 1HFY2024 ended June 30, notes UOBKH analyst Jonathan Koh.
