Digital Core REIT – December 2025 Investor Update: Key Developments, Portfolio Growth, and Market Outlook

Executive Summary

Digital Core REIT (“DCREIT”) has released its December 2025 investor presentation, providing a comprehensive update on its operational performance, portfolio metrics, financial standing, and outlook for the global data centre market. The report highlights robust portfolio occupancy, prudent financial management, ongoing expansion in key global markets, and a pipeline poised to benefit from accelerating demand driven by digital transformation and AI technologies.

Key Highlights and Potential Price-Sensitive Information

• Strong Portfolio Performance: DCREIT operates 11 data centres across North America, Europe, and Asia-Pacific, with an AUM of US\$1.7 billion. The in-service portfolio boasts a 98% occupancy rate (excluding one asset under refurbishment), a weighted average lease expiry (WALE) of 4.7 years, and 100% freehold ownership. The customer base exceeds 120, with 79% of rental income derived from investment-grade tenants.
• Financial Stability and Growth Capacity: Aggregate leverage stands at 38.5%, with US\$431 million in debt headroom available at a 50% leverage ratio. 86% of debt is fixed rate, effectively hedging against rising interest rates. No major debt maturities are due until December 2027, and the weighted average debt maturity is 4 years. Interest coverage ratio is 3.4x, and the average cost of debt is 3.5%.
• Unit Buybacks and DPU Accretion: DCREIT repurchased 1.8 million units year-to-date at an average price of US\$0.565, resulting in a 0.1% Distribution Per Unit (DPU) accretion. 9M25 distributable income rose by 1.9% year-on-year to US\$35.2 million, despite a drop in net profit attributable to unitholders due to higher property and trust expenses.
• Strategic Expansion and Acquisitions: The REIT completed the acquisition of a 20% interest in a second data centre on its sponsor’s Osaka campus, furthering its footprint in Asia-Pacific. It also secured a 15.1% interest in its Frankfurt facility at an 18% discount to appraised value, demonstrating strong sponsor support and pipeline access.
• Portfolio Diversification: The portfolio is strategically diversified by geography (Northern Virginia, Silicon Valley, Los Angeles, Toronto, Frankfurt, Osaka), property type (fully-fitted, shell & core, colocation), and contract type (triple net, gross + electricity, colocation).
• Customer Concentration and Credit Quality: The top 10 customers contribute 61% of annualised rent, with leading names from hyperscale cloud, social media, and technology sectors. Notably, a Fortune 50 software company alone accounts for 30.7% of annualised rent. The portfolio is weighted towards investment-grade clients, enhancing cash flow resilience.
• Market Position and Valuation: DCREIT trades at a significant discount to NAV (approx. -36%), with a sector-leading DPU yield of 7.3%. This discount is notable compared to global peers, potentially presenting a value opportunity for investors.
• Robust Demand Drivers: AI adoption, digital transformation, cloud computing, and edge computing are all driving exponential demand for data centre capacity. North American data centre demand by workload is forecasted to grow 2.5x to 3.5x from 2023 to 2030, with AI workloads representing the fastest-growing segment.
• Market-Specific Regulatory and Supply Updates:
  • Northern Virginia: Facing stricter zoning, utility, and sustainability standards as local governments balance growth with environmental and social concerns. PJM Interconnection proposals may require large data centres to secure their own power, potentially shifting some demand to less regulated markets.
  • Northern California & Los Angeles: New legislation targets data centre energy and water use, raising regulatory hurdles and costs. Power availability is a key bottleneck, but landmark deals (e.g., San Jose-PG&E agreement) may provide relief for future projects.
  • Toronto: Investment and high-performance computing (HPC) projects are accelerating, supported by improved connectivity and private capital inflows.
  • Frankfurt & Osaka: Both regions are witnessing major new developments, with Osaka emerging as a core APAC data centre market. Power delivery remains the key constraint to further growth.
• ESG and Sustainability Focus: The REIT targets LEED Silver or equivalent green standards, 100% renewable energy availability, a 30% reduction in Scope 1 & 2 emissions intensity, and a 12% cut in water usage intensity by 2030. Social and governance initiatives include board diversity targets, employee engagement, and zero tolerance for business ethics violations.
• Sponsor Strength and Alignment: DCREIT is sponsored by Digital Realty, the world’s largest data centre owner/operator with a \$60bn equity market cap and \$79bn enterprise value. The sponsor has demonstrated strong support through backstopped loans, discounted asset contributions, and a robust future pipeline (over US\$15bn of acquisition opportunities). Sponsor’s interests are aligned via substantial direct ownership and management fees paid in units and/or cash.
• Organizational Structure and Governance: The REIT structure is designed to maximize unitholder value with a base management fee of 0.5% p.a. (based on deposited value) and a performance fee of 3.5% p.a. (based on net property income). At least 90% of annual distributable income is paid out, and all management fees are subject to unitholder approval.

Potential Price-Moving Considerations for Shareholders

• Deep Discount to NAV and High Yield: DCREIT’s significant trading discount to NAV and sector-leading DPU yield could attract value and income-focused investors, especially as fundamentals remain strong.
• Strong Pipeline and Sponsor Commitment: Ongoing acquisitions (e.g., Frankfurt and Osaka) and a pipeline exceeding US\$15 billion signal substantial future growth potential, driven by the sponsor’s global reach and financial strength.
• Exposure to AI and Digital Infrastructure Growth: The REIT is well-positioned to benefit from surging data centre demand driven by AI, cloud, and digital transformation, with AI-related CapEx expected to increase ~30% over the next year.
• Regulatory Risks and Opportunities: New regulations in the US and APAC, especially around energy and water usage, could impact project economics and supply in some markets. However, DCREIT’s diversified global footprint may help mitigate these risks and allow it to capitalize on supply-constrained, high-growth regions.
• Customer Concentration: While the portfolio’s tenant base is investment-grade, the top customer accounts for over 30% of annual rent, representing a key risk factor to monitor.
• Sustainability Commitments: Enhanced ESG targets may increase attractiveness to institutional investors and support premium valuations in the long term.
• Financial Flexibility: High fixed-rate debt, long maturities, and ample headroom provide flexibility for further acquisitions and organic growth.

Conclusion

Digital Core REIT’s December 2025 update underscores its strong operating fundamentals, disciplined financial management, and unique growth prospects underpinned by global digital transformation and AI adoption. The combination of significant discount to NAV, high yield, strong sponsor alignment, and exposure to secular growth trends could be catalysts for a re-rating of the shares. However, investors should monitor regulatory developments, customer concentration risk, and execution of the robust expansion pipeline.

Disclaimer: This article is for informational purposes only and does not constitute investment advice or an offer to buy or sell any securities. Please refer to Digital Core REIT’s official disclosures and consult your financial adviser before making investment decisions. The author and publisher accept no liability for any loss arising from reliance on the information presented above.

View DigiCore Reit USD Historical chart here