NTT DC REIT Delivers Solid 9M FY25/26 Performance Amid Robust Leasing Momentum

Key Financial and Operational Highlights

• Stable Financial Results: NTT DC REIT reported gross revenue of US\$106.0 million for the nine months ended 31 December 2025, exceeding its adjusted IPO forecast by 1.7%. Distributable income was slightly ahead at US\$36.3 million, marking a 0.4% improvement over forecast. Net property income (NPI) was marginally below forecast by 0.6% at US\$47.1 million, primarily due to lower occupancy and softer power revenues, though this was partially offset by higher tenant fit-out revenue and positive foreign exchange impacts.
• Strong Balance Sheet: The REIT’s portfolio remains 100% unencumbered, with all loans unsecured. Aggregate leverage stands at 32.5%, with a weighted average all-in interest rate of 3.94% and 70% of debt at fixed rates. The interest coverage ratio is healthy at 4.0x, and the REIT has a substantial headroom of US\$201 million before reaching the 40% leverage cap.
• Operational Strength: The REIT demonstrated robust operational performance with strong leasing activity. Portfolio occupancy, including committed leases, reached 97.3% as of 31 December 2025. Rent reversion for the period was notably positive at +9.2%, reflecting strong pricing power and continued tenant demand.

Leasing Performance and Sustainability Initiatives

• Leasing Activity: Approximately 2,400kW of leases were secured across key assets (CA1, CA3, SG1), with most commencing from 4Q FY25/26. These new leases are expected to further support revenue growth and maintain high occupancy levels.
• Sustainability: The SG1 data centre in Singapore has been fully powered by renewable energy since 1 January 2026, underlining the REIT’s commitment to ESG goals. Additionally, the Vienna asset (VIE1) contributes to local decarbonization by supplying waste heat to the district-heating network.
• Potential Related-Party Lease: Advanced negotiations are underway with a related-party tenant at SG1, with management expecting meaningful rent reversion. This could deliver upside to future rental income, though shareholders should monitor for any announcements regarding these negotiations.
• Management Fee Structure Review: Discussions with the Sponsor to potentially revise the management fee structure are ongoing, aimed at enhancing alignment with Unitholders’ interests. Implementation is targeted by 1H FY26/27, which could have a material impact on future distributable income and shareholder returns.

Portfolio and Customer Base Details

• Diversified Portfolio: The REIT owns six assets across the U.S., EMEA (Europe, Middle East & Africa), and APAC, with a total purchase consideration of US\$1.5 billion and a design IT load of 90.7 MW. The majority (82.7%) of assets are freehold.
• Customer Base: The top 10 customers contribute 75.5% of monthly base rent, with significant exposure to blue-chip, investment-grade tenants, including several Fortune 100 U.S. companies in the automotive, software, and technology sectors. About 89.4% of leases have fixed escalation clauses, averaging 2.7% per annum, providing rental growth visibility.
• Well-Staggered Lease Expiry: The lease expiry profile is well staggered, with a weighted average lease expiry (WALE) of 4.4 years. Less than 12% of leases (by base rent) are due to expire in FY25/26, reducing near-term renewal risk.

Capital Management and Debt Profile

• Debt Maturity: The REIT’s debt maturity profile is well managed, with no debt maturities in the next three financial years, and flexibility to extend maturities via two 12-month extension options. The debt is diversified by currency (EUR 45%, USD 30%, SGD 25%), offering natural hedging benefits.
• Sensitivity Analysis: Even with a 10% decrease in EBITDA or a 100 basis point rise in interest rates, interest coverage would remain above regulatory thresholds (3.2x–3.6x), indicating resilience to market fluctuations.

About the Sponsor: NTT Limited & Strategic Positioning

• NTT Limited: A subsidiary of NTT DATA, Inc., NTT Limited is the world’s third largest data centre (DC) provider outside China, operating more than 2,300 MW of capacity across 92 sites globally.
• Group Strength: NTT Group is a leading global IT and telecommunications group with FY24/25 operating revenue of approximately US\$91.6 billion and EBITDA of US\$21.7 billion. The Sponsor’s scale and network provide NTT DC REIT with competitive advantages in technology, connectivity, and customer relationships.
• Growth Prospects: The Sponsor’s global pipeline and technological innovations, such as advanced cooling and optical network solutions, position the REIT to benefit from ongoing growth in data centre demand, driven by digital transformation and AI infrastructure investment.

Shareholder Considerations & Price-Sensitive Matters

• Fee Structure Review: The ongoing review and possible revision of the management fee structure with the Sponsor is a potentially price-sensitive development. A more Unitholder-aligned fee structure could enhance distributable income and investor returns.
• Related-Party Transactions: Lease negotiations with a related-party tenant at SG1 may materially impact rent reversion and future cash flows. Shareholders should closely monitor further announcements.
• Strong Leasing and Occupancy: High occupancy levels, strong rent reversions, and the successful backfilling of space at CA1 and CA3 support near-term revenue stability and growth.
• Sustainability Initiatives: Progress in renewable energy sourcing and decarbonization efforts could attract ESG-focused capital and enhance the REIT’s market appeal.

Conclusion

NTT DC REIT’s latest nine-month performance demonstrates financial and operational resilience, with stable income, robust balance sheet metrics, and strong leasing momentum. The ongoing fee structure review and lease negotiations present potential catalysts that could positively impact distributable income and share value. Shareholders are advised to stay alert for further corporate announcements, especially regarding related-party transactions and management incentive realignment, as these could be price-sensitive developments.

Disclaimer: This article is for informational purposes only and does not constitute investment advice or an offer to buy or sell securities. Investors should consult the full financial reports and consider their own circumstances before making investment decisions. Past performance is not indicative of future results. The value of investments in NTT DC REIT may go up or down, and there is a risk of loss of principal. Please refer to official announcements and disclosures for the most accurate and up-to-date information.

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