Digital Core REIT November 2025 Investor Update: Key Insights for Investors

Overview: Pure-Play Data Centre S-REIT with Robust Growth Prospects

Digital Core REIT, a dedicated data centre Real Estate Investment Trust (S-REIT) sponsored by a leading global data centre owner and operator, continues to position itself as a significant player in the digital transformation trend. As of September 30, 2025, Digital Core REIT’s portfolio comprises 11 high-quality data centres, with assets under management (AUM) totaling US\$1.7 billion. The portfolio boasts an impressive occupancy rate of 98% (excluding one property under refurbishment), a weighted average lease expiry (WALE) of 4.7 years, and a customer base exceeding 120, including many investment-grade tenants.

Key Financial and Operational Highlights

• 98% Occupancy (excluding one property under refurbishment)
• AUM: US\$1.7 billion
• Aggregate Leverage: 38.5%, with US\$431 million in debt headroom (at 50% leverage)
• Fixed Rate Debt: 86% of borrowings, mitigating interest rate risks
• No debt maturities until December 2027; US\$202 million undrawn from existing credit facilities
• Distributable Income: US\$35.2 million for the first nine months of 2025 (+1.9% vs 9M24)
• Unit Buyback: 1.8 million units repurchased YTD at an average of US\$0.565, resulting in 0.1% DPU accretion
• APAC Expansion: Completed the acquisition of a 20% interest in a second data centre on the Osaka campus

Strategic Portfolio and Market Positioning

Digital Core REIT’s strategy is centered around core, sustainable growth, underpinned by the accelerating demand for digital infrastructure and artificial intelligence (AI)-driven workloads. The trust has a diverse, mission-critical data centre portfolio, with 100% freehold assets and concentrations in key metros across the U.S., Canada, Germany, and Japan.

The REIT’s customer base is robust, with 79% of annualized rent coming from investment-grade or equivalent tenants. Notably, its top 10 customers include major hyperscale cloud service providers, global technology firms, and social media platforms, accounting for 61% of annualized rent. The largest customer (a Fortune 50 software company) occupies four locations and contributes nearly 31% of annualized rent.

Financial Performance and Stability

• Revenue Growth: Revenue for the first nine months of 2025 rose 83.9% year-on-year to US\$132.4 million, driven by acquisitions and leasing activity.
• Net Property Income: Increased 49.6% to US\$67.7 million over the same period.
• Distributable Income: Reached US\$35.2 million, up 1.9% year-on-year.
• Net Asset Value (NAV) per Unit: US\$0.78 as of September 30, 2025, with an adjusted NAV of US\$0.77 per unit. However, the unit price as of the reporting date was US\$0.475, representing a significant discount to NAV.
• Debt Profile: Total debt outstanding stands at US\$671 million, with an aggregate leverage of 38.5% and a weighted average debt maturity of 4.0 years. The average cost of debt is 3.5%, and the interest coverage ratio is 3.4x.

Price-Sensitive Note: The significant discount of the unit price (US\$0.475) to NAV (US\$0.78) may present a value opportunity for investors, subject to market conditions and risk assessment. The repurchase of units by the REIT could also signal management’s confidence in the intrinsic value of the units and may support the unit price.

Growth Drivers and Expansion Potential

• AI and Digital Economy: Ongoing digital transformation and the rise of AI are expected to be major growth drivers, with AI-related data centre requirements forecasted to grow at a compounded rate. The REIT is well-positioned to capture this demand with its scalable, high-quality portfolio.
• Expansion into APAC: Acquisition of a 20% interest in a second Osaka data centre highlights the trust’s focus on high-growth Asia-Pacific markets. Osaka is emerging as a significant data centre hub due to its strategic position and power access, complementing Tokyo as a twin digital growth pole in Japan.
• Industry-Leading Sponsor and Pipeline: Digital Core REIT is sponsored by Digital Realty, one of the world’s largest data centre owners and operators with 300+ data centres, 231,000+ cross connects, and 5,000+ global customers. The sponsor’s US\$15+ billion acquisition pipeline and ongoing investment in new developments offer significant future growth prospects for the REIT.

Market and Regulatory Landscape

• Northern Virginia: The world’s largest data centre market is experiencing robust demand but faces new zoning and operational regulations in Loudoun County and potential changes in grid interconnection requirements. These could affect the pace of new supply but are expected to underpin rental growth and asset values for existing facilities.
• Northern California & Los Angeles: New legislative developments in California (including SB 57 and AB 93) are increasing scrutiny over data centre power and water use, which could raise costs and limit new supply, potentially benefiting incumbent operators.
• Frankfurt: The market is expanding with major new developments and continued strong leasing. Large investments by global players (e.g., Oracle, Data4) reinforce Frankfurt’s position as Europe’s largest data centre hub.
• Toronto & Osaka: Both markets are seeing increased investment and demand, with Toronto benefiting from improved connectivity and high-performance computing trends, and Osaka focusing on campus-scale expansion and power availability.

Price-Sensitive Note: Regulatory changes in key U.S. markets (e.g., Loudoun County and California) could affect supply dynamics, which, if supply is curtailed, may drive rental growth for existing assets and potentially enhance NAV and distributable income.

ESG Commitments and Corporate Governance

• LEED Silver or equivalent standards, Energy Star certification, and 100% renewable energy options for customers
• Targets for reducing Scope 1 and 2 emissions by 30% and water intensity by 12% per square foot by 2030
• Strong focus on diversity, occupational health and safety, and business ethics
• 100% successful completion of annual security and ethics training

Management and Sponsor Support

• REIT manager fees are aligned with unitholder interests, comprising a base fee (0.5% of deposited value) and a performance fee (3.5% of net property income)
• Sponsor support demonstrated by providing a five-year, interest-free loan to backstop cash flow shortfall in Toronto and facilitating strategic asset acquisitions at discounted valuations
• Commitment to accretive growth through ongoing joint ventures and capital partnerships

Potential Price Movers & Investor Takeaways

• Significant discount of unit price to NAV and ongoing unit buybacks may offer value upside if market conditions stabilize or improve
• Expansion into high-growth APAC markets, especially through off-market deals leveraging sponsor relationships, enhances growth prospects
• Regulatory shifts in major U.S. markets may benefit existing operators by limiting new supply and supporting rental growth
• Strong sponsor pipeline and proven access to capital for accretive acquisitions set the stage for continued DPU growth
• ESG and sustainability initiatives strengthen the REIT’s appeal to institutional and ESG-focused investors

Conclusion

Digital Core REIT offers a unique, high-quality opportunity for investors seeking exposure to the rapidly growing digital infrastructure sector. With robust operational metrics, a strong sponsor, a substantial pipeline, and disciplined capital management, the REIT is positioned for sustainable growth. However, investors should monitor ongoing regulatory developments and unit price movements closely, as these factors could materially impact future performance and valuations.

Disclaimer: This article is for informational purposes only and does not constitute investment advice or a solicitation to buy or sell any securities. Investors should conduct their own due diligence and consult with their financial advisors before making investment decisions. All financial figures and projections are based on the November 2025 Digital Core REIT investor presentation and may be subject to change. Past performance is not indicative of future results.

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