Digital Core REIT (DCREIT) DCRU has reported a distribution per unit (DPU) of 3.70 US cents for FY2023 ended Dec 31, 2023, 15.9% below forecast and a 7.0% drop from its FY2022 DPU of 3.98 US cents.
For 2HFY2023, DCREIT posted a DPU of 1.78 US cents, down 19.1% compared to the 2.20 US cents reported the same period last year.
The REIT’s gross revenue decreased 4.8% y-o-y to US$102.6 million, as utilities reimbursement was lower y-o-y, in line with lower utilities expenses, while recovery income was higher from higher recoverable property taxes and other expenses.
Property expenses for the full-year period increased by 3.1% y-o-y to US$39.5 million, largely due to higher property taxes,and other property expenses. Both the lower gross revenue and higher property expenses were partially offset by lower utilities and repairs and maintenance expenses.
As a result, the REIT’s net property income (NPI) decreased 9.1% y-o-y to US$63.1 million for FY2023.
Distributable income to unitholders was also down by 7.3% y-o-y to US$41.5 million.
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DCREIT’s annualised distribution yield for FY2023 came in at 5.75%, down 276 basis points from 7.24% in FY2022.
The distribution will be paid on March 27 to unitholders of record as at Feb 9.
The REIT had US$559 million of total debt outstanding as at Dec 31, 2023, including US$505 million of unsecured term loans due 2025 to 2027 and US$54 million outstanding on its unsecured revolving credit facility, consisting primarily of Japanese Yen-denominated borrowings used to finance the acquisition of the 10% interest in the Osaka data centre in November last year.
Digital Core owns a diversified portfolio of interests in 12 mission-critical facilities concentrated in core data centre markets across the United States, Canada, Germany and Japan. The portfolio was 97% leased with a weighted average lease expiry (WALE) of approximately 2.8 years.
As at Dec 31, 2023, DCREIT’s aggregate leverage stood at 40.5%. The weighted average cost of debt was approximately 4.5% for FY2023, while the weighted average debt maturity was approximately 2.8 years. Approximately 73% of total interest rate exposure was hedged as at end-2023.
CEO of the manager John Stewart says: “Digital Core REIT turned a pivotal corner in late 2023, reaching agreements to resolve a large customer bankruptcy and preserving the flexibility of our balance sheet with proceeds from asset sales at atractive valuations.”
“In addition, the interest rate tightening cycle appears to be levelling off, while data centre transaction cap rates have begun to edge up, significantly narrowing the gap between public and private market valuations and putting us in excellent position to capitalize on favourable fundamentals and our industry-leading acquisition pipeline in 2024,” he adds.
Units in DCREIT closed 0.5 US cents lower or 0.78% down at 64 US cents on Feb 1.
