UOB Kay Hian Private Limited
9 July 2025

NTT DC REIT (NTTDCR) IPO: Riding the AI-Driven Data Centre Boom with Lucrative Yield and Global Growth Potential

Overview: Introducing NTT DC REIT’s Global Data Centre Portfolio

NTT DC REIT (NTTDCR) is making waves in the real estate investment trust (REIT) market with the launch of its Initial Public Offering (IPO). Specializing in Tier 3 data centres across high-demand global locations, NTTDCR offers investors access to one of the fastest-growing segments of real estate — the digital infrastructure that powers cloud computing and artificial intelligence.
Key highlights include:
IPO Share Price: US$1.00
Market Capitalization: US$1,030.2 million
Portfolio Valuation: US$1.6 billion
Forecast FY27 Yield: 7.8%
Net Asset Value (NAV) per Share: US$0.95
Net Debt per Share: US$0.50
Major Shareholder: NTT Ltd (25% stake)

Portfolio Composition: Strategic Global Footprint

NTTDCR’s initial portfolio consists of six stabilized, income-producing data centres located in crucial data markets:

• Northern California (3 assets)
• Northern Virginia (1 asset)
• Vienna, Austria (1 asset)
• Singapore (1 asset)

All centres are Tier 3, carrier-neutral, and feature N+1 redundancy. Except for the Singapore asset (SG1), which has a lease until August 2040 (with a 30-year extension option), all properties are freehold. The portfolio offers a total IT load of 90.7MW.
Geographic Revenue Split:

• Northern California: 53.9%
• Singapore: 16.5%
• Vienna: 16.1%
• Northern Virginia: 13.5%

Diversified Tenant Base: Hyperscale and Colocation Synergy

NTTDCR’s rental income is almost evenly split between:

• Hyperscale tenants (51%): Includes global cloud service providers and technology giants.
• Colocation tenants (49%): Represent a wide range of industries.

The REIT boasts a robust portfolio occupancy rate of 94.3% and a Weighted Average Lease Expiry (WALE) of 4.8 years (as of December 2024). Customer retention has been exceptional at 98.3% over the past three years, reflecting the “stickiness” of data centre tenants.

Rental Upside: Significant Reversion Potential Across Markets

NTTDCR’s properties offer substantial room for rental growth:

Key Points:

• Contractual rental escalations averaging 3.3% annually apply to 74.6% of contracts.
• Market rents are significantly higher than current in-place rents, especially in Northern California and Singapore, indicating strong rental reversion opportunities at lease renewal.

Customer Concentration: Opportunities and Risks

A notable risk is customer concentration:
The largest tenant, a Fortune 100 US automotive company (believed to be an electric vehicle leader), accounts for 31.5% of base rent (Dec 2024). Their leases, used for autonomous driving data, have a WALE of 8.5 years and 3% annual rental escalation. While this provides stability, it increases dependency risk on a single client.

Backed by a Global Giant: NTT as Sponsor

NTT Limited, incorporated in England and Wales, is the world’s third-largest data centre provider (outside China) via its subsidiary NTT Global Data Centres. The sponsor’s scale is impressive:

• 2,200MW of IT power (1,419MW operating, 858MW under construction)
• 133 buildings across 91 sites globally
• Will retain a 25% stake post-IPO, providing operational expertise and property management support

Growth Engine:
NTTDCR has a global right of first refusal (ROFR) over 123 stabilized income-producing data centres (approx. 2,000MW capacity), of which 130MW are identified for potential acquisition in the next five years. This could see the REIT double its size and capacity post-IPO.

Financial Performance Snapshot

Additional metrics:

• EBITDA margin (2024): 35.0%
• Debt to total capital: 35.0%
• Debt headroom: US\$131 million before reaching 40% leverage
• All-in cost of debt: 3.9% (FY26), 4.0% (FY27)

Distribution Yield: Attractive Returns Outpacing Peers

NTTDCR has forecast a Distribution Per Unit (DPU) of 7.5 US cents for FY26 and 7.8 US cents for FY27. At the IPO issue price of US$1.00, this translates into distribution yields of:

• FY26: 7.5%
• FY27: 7.8%

These yields are superior to several established peers:

• DCREIT: 7.4%
• KDCREIT: 5.0%
• MINT: 6.6%

AI and Data Centre Market: Structural Growth Drivers

The rise of generative AI is a major force behind data centre demand. As AI models scale up in capacity, the computational workload — and thus the need for robust data centre infrastructure — increases exponentially.

• AI revenue is set to grow at a 77% CAGR from 2024 to 2027.
• Global data creation and consumption are forecasted to rise at a 24.3% CAGR from 2024 to 2027.

Distinguished Supporters: Cornerstone Investments

GIC, Singapore’s sovereign wealth fund, has committed to a 9.8% stake in the IPO — a strong endorsement of the REIT’s prospects.

Risk Factors: What Investors Should Watch

Customer concentration: Heavy reliance on a single tenant poses risks if the relationship sours or the tenant’s needs change.
Short-term profitability: The REIT posted a net loss in 2024, but this is expected to improve as rents rebase higher and new acquisitions are made.
Political volatility: Short-term distribution yields may be affected by political or regulatory factors in key markets.

Growth Catalysts: What Could Drive the Share Price Higher?

• Rising demand from hyperscalers and colocation tenants, especially those deploying AI applications.
• Accretive acquisitions from the sponsor’s pipeline, leveraging the global ROFR agreement.
• Market rental reversions as leases renew at higher prevailing rates.

Peer Comparison: Global Data Centre Heavyweights

NTTDCR’s sponsor ranks as the third-largest data centre provider worldwide, behind Digital Realty and QTS. The top 10 global data centre providers (by MW capacity) include:

• Digital Realty: 3,200 MW
• QTS: 3,156 MW
• NTT: 2,277 MW
• Equinix, CloudHQ, Vantage, STACK Infrastructure, CyrusOne, Aligned Data Centres, EdgeConneX

Lease Expiry Profile: Well-Staggered and Defensive

Lease expiries (as % of monthly base rent):

• 2025: 13.1%
• 2026: 16.4%
• 2027: 6.4%
• 2028: 5.5%
• 2029: 2.1%
• 2030: 8.5%
• 2031 & beyond: 45.8%
• Open & rolling: 2.2%

Balance Sheet Highlights (as of March 2024)

Cash Flow Highlights (2024)

• Operating cash flow: US\$70.8m
• Investing cash outflow: US\$1,277.1m (mainly for capex)
• Financing inflow: US\$1,240.1m (including US\$732.4m from share issuance and US\$560.1m from borrowings)
• Ending cash & equivalents: US\$33.8m

Recommendation: Subscribe for Growth and Yield

NTTDCR’s IPO offers a rare combination of:

• Lucrative, above-market distribution yield (7.8% forecast for FY27)
• Potential for strong capital growth via accretive acquisitions from the sponsor’s global pipeline
• Significant rental reversion opportunities as leases reset to market rates
• Robust backing by a world-leading data centre sponsor
• Distinguished cornerstone investors including GIC

Investor Takeaway: For those seeking exposure to the surging global demand for digital infrastructure — especially as AI and cloud computing accelerate — NTTDCR provides a compelling, yield-driven opportunity with strong growth prospects.

Important Note

This analysis is provided for informational purposes only and does not constitute investment advice. Investors should carefully consider all risk factors and consult with their financial advisors before making any investment decisions.