Digital Core REIT Plans Stakes in Digital Realty Data Centres in Frankfurt, Dallas

Singapore-listed Digital Core REIT has entered into a deal with its sponsor, US server-hosting giant Digital Realty, to acquire a stake in a German data centre and a potential interest in a Texas facility, subject to market conditions.

Under the terms of the agreement, the REIT would acquire a 25 percent stake in a Digital Realty data centre in Frankfurt, an asset with a total value of $558 million, with the option to acquire up to an 89.9 percent interest in the 34-megawatt facility, the trust’s manager said Thursday in a release. The deal also includes the option to acquire a 90 percent stake in a Dallas data centre, a 7MW facility valued at $199 million.

The amount of interest to be acquired is contingent on whether Digital Core REIT successfully raises capital through an equity fundraising to partially finance the transaction, which would mark the first acquisitions for the trust since it raised $600 million in Singapore’s biggest IPO of 2021.

“We are pleased to contribute to the next phase of Digital Core REIT’s growth, reinforcing Digital Core REIT’s position as an ideal perpetual capital partner for Digital Realty, while continuing to provide our customers ubiquitous connectivity and a seamless customer experience across our global platform,” said Digital Realty CEO A William Stein.

Fundraising Provision

If the equity fundraising fails to take place, Digital Core REIT will pursue a fully debt-funded transaction, in which case the trust will acquire a 25 percent stake in the Frankfurt facility for a consideration of $140 million and no interest in the Dallas property.

Both assets were purpose-built as data centres by Texas-based Digital Realty within the past five years, the trust’s manager said. The Frankfurt data centre is tethered via dark fibre to Digital Realty’s cross-town Hanauer Landstrasse campus, with direct access to more than 700 carriers and internet service providers.

The Dallas data centre is situated at the Digital Dallas campus in the Richardson telecom corridor and is tethered via dark fibre to Digital Realty’s interconnection hub in downtown Dallas.

“The acquisition of these state-of-the-art facilities will enable Digital Core REIT to deliver upon our external growth strategy and establish a presence in two leading core global data centre markets,” said John J Stewart, CEO of the trust’s manager. “This transaction also strengthens Digital Core REIT’s portfolio through improved customer and geographic diversification, while delivering near-term DPU accretion and long-term value for unitholders.”

Unitholder Consent

As an interested-party transaction, any deal will be subject to approval by Digital Core REIT’s unitholders at an extraordinary general meeting to be held in the fourth quarter of 2022.

The trust’s portfolio comprises 10 freehold data centres in key markets of the US and Canada with a valuation of $1.46 billion and a net rentable area of 1.2 million square feet (111,484 square metres). The facilities are fully leased to a roster of blue-chip customers, each with numerous deployments across Digital Realty’s global platform.

Sponsor Digital Realty’s global data centre footprint stretches across 290 facilities in 50 metropolitan areas of 26 countries.