Digital Core REIT climbs nearly 15 percent on trading debut

Digital Core REIT's property at 2401 Walsh Avenue in Silicon Valley in California, U.S. Credit: Digital Core REITDigital Core REIT's property at 2401 Walsh Avenue in Silicon Valley in California, U.S. Credit: Digital Core REIT

Digital Core REIT ended Monday at US$1.01, up 14.8 percent compared with its initial public offering (IPO) price of US$0.88, marking a strong trading debut.

According to the REIT’s balloting announcement last week, units of the REIT’s IPO had met with strong demand, with the total offering coming in at 19.4 times subscribed.

The REIT will invest in data center assets and assets used to support the digital economy. The initial portfolio includes 10 institutional quality, freehold data centers in top-tier markets in the U.S. and Canada, with an appraised valuation of US$1.4 billion, the prospectus said.

Mohamed Nasser Ismail, the head of equity capital markets at SGX, noted the data center sector has been one of the bright spots amid the pandemic, with the segment seeing robust demand due to digital transformation and emerging technology trends.

“Digital Core REIT offers a compelling investment opportunity, anchored by the strong track record and sustainability leadership of its sponsor,” Ismail said in a press release Monday.

The sponsor is Digital Realty, the largest global provider of cloud- and carrier-neutral data center, co-location and interconnection services, the prospectus said. Digital Realty is one of the 10 largest U.S.-listed REITs, the prospectus said.

Digital Realty plans to co-invest with Digital Core REIT for all future acquisitions, with the sponsor to hold 10 percent of each asset and the Singapore REIT holding the remainder, the prospectus said.

The IPO had attracted institutional interest.

Among the participants in the pre-listing placement were two subsidiaries of Singapore state-owned investment company Temasek Holdings: Fullerton Fund Management and SeaTown Master Fund.

In addition, on Monday, the REIT noted that Great Eastern, a subsidiary of OCBC, had been allotted 500,000 units under the offering’s placement tranche.

Arun George, an analyst/Insight Provider at Global Equity Research, who publishes on Smartkarma, said in a note filed on 27 November, that the REIT offers “an attractive value proposition,” with prospects for distribution per unit (DPU) growth via both organic growth and yield accretive acquisitions.

He noted its dividend yield for fiscal 2023, estimated at 5.0 percent, comes in below the 5.6 percent median yield for the peer group, but still above the estimated 4.7 percent fiscal 2023 yield for close peer, pure-play data center S-REIT Keppel DC REIT.

The units closed off their intraday high of US$1.09.