Digital Core REIT has completed the acquisition of a 20% interest in a second fully-fitted freehold data centre in Osaka from Mitsubishi Corporation for JPY13 billion ($116 million). The acquisition is expected to be 1.8% accretive to Digital Core REIT’s distribution per unit (DPU) and is expected to increase aggregate leverage from 34.0% as at end-2024 to 37.3%.
The acquisition will increase Digital Core REIT’s annualised revenue contribution from Osaka from 7% as at end-2024 to 11% pro forma for the acquisition.
The Osaka data centre was purpose-built and completed in July 2021. It offers 19,900 kilowatts (kW) of critical IT load and is situated on sponsor Digital Realty’s Osaka connected data centre campus, servicing “a diverse community of leading hyperscale and technology companies”, according to a March 26 announcement.
“The facility is predominantly leased to leading global cloud providers with large and growing global data centre footprints, increasing the portion of annualised rent from investment grade customers from 81% as at Dec 31, 2024 to 82% pro forma for the acquisition,” says the manager of Digital Core REIT.
In a separate bourse filing, the REIT manager says it commissioned an independent property valuer, Newmark Valuation & Advisory, to value the Osaka Data Centre. The valuation of the Osaka Data Centre was JPY65.39 billion at 100% share. The agreed value for the transaction was slightly lower, at JPY65 billion for 100% share.
In addition to the JPY13 billion purchase consideration, there is an acquisition fee of JPY130 million, representing 1% of the purchase consideration. There are also estimated professional and other fees and expenses of approximately JPY47 million.
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The total acquisition outlay is expected to be approximately JPY13.177 billion.
Euro medium-term note
Separately, Digital Core REIT also announced the establishment of a US$750 million ($1 billion) euro medium-term note programme (EMTN) and has appointed Mizuho Securities (Singapore) as the sole arranger and dealer.
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The EMTN programme enables Digital Core REIT to issue fixed or floating rate notes denominated in any currency as agreed between Digital Core REIT and the relevant lenders.
“The establishment of the medium-term note programme is a significant milestone in the evolution of our balance sheet and the maturity of our organisation,” says Dave Craft, CFO of the manager. “This programme will reduce our reliance on bank debt, open up access to the public debt capital markets and set the stage for accelerated growth of our asset base.”
As at 9.25am, units in Digital Core REIT are trading 0.5 US cents higher, or 0.9% up, at 54 US cents.
