Digital Core REIT - DBS Research 2023-02-03: Strong Demand Continues To Drive Rents Higher

• Digital Core REIT (SGX:DCRU)'s FY22 distributable income of US$44.8m was ~5.8% below IPO Forecast. This was mainly due to higher borrowing costs that amount to ~US$5.4m. Higher costs were partially offset by higher NPI (~US$1.7m), and lower trust expenses and non-controlling interest (~US$1.0m).
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• The share buyback of ~10.7m units led to a ~0.04 cents in US$ accretion to DPU. Digital Core REIT will continue to consider share buyback as a tool to generate accretion but will have to weigh the costs and benefits.

Healthy portfolio occupancy of 98%

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• No lease expiries until FY24; 13% of leases due to expire in FY24
• Portfolio valuations saw a ~1.1% decline y-o-y to US$1.43bn, better than anticipated. In local currency terms, valuations would have only declined ~0.2%. Weaker CAD and EUR led to some translation loss.
• On average, cap rates expanded ~25bps to ~4.5%. Valuations in Northern Virginia held up well and reported some gains. However, valuations in Silicon Valley, Los Angeles, and Toronto saw a slight decline. The valuation loss at the Toronto DC was further exacerbated by the bankruptcy of SunGard and it vacating the space.

Gearing remains very healthy at ~34%

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Dale LAI DBS Group Research | Derek TAN DBS Research | https://www.dbs.com/insightsdirect/ 2023-02-03 SGinvestors.io

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