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Digital Core REIT buys back shares amid pressure; Wee family raises stake in UOL Group

The Edge Singapore
The Edge Singapore • 3 min read
Digital Core REIT buys back shares amid pressure; Wee family raises stake in UOL Group
The 372-unit AMO Residence in Ang Mo Kio, which was launched by UOL Group in July last year / Photo: Samuel Isaac Chua
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Digital Core REIT DCRU

has been buying back its units, amid a steady decline in the price of units in the month of March, as investors fret over its exposure to potentially troubled tenants.

On March 28, the REIT bought back 130,000 units on the open market at 42.5 US cents each, or US$55,315.63 ($73,545.69) in total. This brings the total number of units bought back under the current mandate to just over 11 million shares, or 0.9783% of the total base. Just a day earlier, on March 27, Digital Core REIT had acquired 225,000 units for 42.33 cents each on the open market, or a total of US$95,355.64.

In contrast, Sumitomo Mitsui Financial Group, a substantial unitholder, sold some units recently. On March 24, via an asset management subsidiary, the Japanese financial group reduced its stake in Digital Core REIT by selling 105,208 units at 41.26 US cents each, reducing its stake to 78.6 million units or 7% from 7.009% earlier.

No exposure to regional US banks
On March 17, Digital Core REIT, which owns a portfolio of data centres largely in the US, clarified that its portfolio has no exposure to the so-called regional US banks — the small- to mid-sized lenders in America — several of which had recently either suffered runs or had to be rescued.

In a statement, John Stewart, CEO of the REIT’s manager, says that the REIT does not have any customer or banking relationship with Silicon Valley Bank, First Republic Bank or any other US regional bank.

“None of Digital Core REIT’s customers are financial services firms, technology startup companies or backed by venture V03 capital. Substantially all (more than 99% of annualized revenue) of Digital Core REIT’s customers are publicly traded companies and the vast majority (75% of annualised revenue) are investment-grade or equivalent,” adds Stewart.

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In a follow-up statement on March 20, Digital Core REIT notes that its second-largest customer, which contributes 22.6% of the rent, suffered a rating downgrade on Feb 17 by Moody’s Investors Service to Caa2 from B3.

In line with its usual practice, the REIT did not name this customer, other than to describe it as a “publicly traded global colocation and interconnection provider that occupies three buildings in Silicon Valley, two in Los Angeles and less than 5% of a facility in Frankfurt.”

Digital Core REIT adds that on March 16, this customer entered into an agreement with its lenders to extend the maturity date of its only 2023 debt maturity to April 2024. “The customer remains current on its rental obligations and has not requested any rent deferments, rental reductions, or contraction of the space it occupies,” adds Stewart.

See also: Chairman and CEO Kuok raises stake in Wilmar International following softer 1Q

For FY2022 ended Dec 31, 2022, Digital Core REIT reported a net property income of US$69.4 million ($92.3 million), 3.8% higher than the US$66.9 million forecast at the time of its IPO in late 2021.

Wee family raises UOL stake
Wee Investments, a privately-held vehicle of the Wee family who controls UOL Group, acquired 300,000 UOL shares at $6.73908 on the open market on March 27. This raised the family’s direct stake in the company from 132.7 million shares to just over 133 million shares or 15.744%.

The price the Wees paid is around half of the company’s net asset value of $12.55 as at Dec 31, 2022, which was an increase from $11.99 as at Dec 31, 2021.

On Feb 27, the UOL reported earnings of $491.9 million in FY2022 ended Dec 31, 2022, up 60% from FY2021’s $307.4 million. Revenue in the same period was up 28% y-o-y to $3.2 billion, thanks to better showing across its various business segments of property development, investment and hospitality. UOL plans to pay a first and final dividend of 15 cents, plus a special dividend of 3 cents per share.

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