Digital Core Reit, a pure Data Centre Reit sponsored by US listed Digital Realty Trust, has lodged its prospectus today on 29 Nov 2021 for an initial public offering (IPO) in SGX.
13.4 million units are allocated for the public and 253.7 million units are reserved for the institutional placements.
The price is US$0.88 and converted to S$1.21 per unit as determined by the manager.
Application has actually commenced from today 9pm and will end on 2 Dec, 12pm.
Digital Core Reit will be listed on 6 Dec 2021, 2pm on SGX.
Let me share on 5 reasons why I would apply for this IPO.
1. Pure Data Centre Play
Digital Core Reit will be the only pure data centre Reit on SGX because the likes of Mapletree Industrial Trust, Ascendas Reit and Keppel DC Reit which recently invested in mobile and fibre assets, do not purely own just data centres.
A data centre is a facility hosting digital infrastructure and provides a secure and reliable environment to host servers, network equipments and data storage equipments.
Data centres are a unique property asset class which commands long weighted average lease expiry (WALE), compared to commercial, hospitality and industrial properties which tend to have much shorter rental agreements.
2. Gain Foothold into Proliferation of Cloud Computing and Metaverse
The exploding data due to Internet of Things, applications, games and social media will drive strong demand for data centres and such needs will only set to grow exponentially due to proliferation of cloud computing adoption by companies and the advent of Metaverse.
By owning the land and the facilities which host the digital infrastucture and computing equipments powering the IT applications in the world and the Metaverse, we can safely and peacefully make money while we sleep.
3. 100% Freehold
Digital Core Reit owns 10 100% freehold, mission-critical, institutional quality data centres located in key strategic markets across the US and Canada. Occupany is 100% in all 10 data centres. 4 are located in Silicon Valley, a fertile ground where many tech firms are built up. 2 in Los Angeles, the entertainment capital of the world, 1 in Toronto, the business and financial capital of Canada and 3 in Northern Virgina which is the largest data centre market in the world.
4. Inflation beating Triple Net Lease with rental escalations
This Reit promised a yield of 4.85% for 2022 and 5% for 2023.By having triple net lease for the lease of its data centres, the tenants will liable to pay for all the expenses of the data centres. This help to reduce operating costs and thereby ensuring that our DPU remains sustainable. Coupled with the 1% to 3% rental escalations, the DPU is set to increase slowly and steadily to beat inflation if we have the patience to hold this Reit for the long-term horizon.
5. Attractive Valuation
Last but not least, we need to ensure we get the best bang for our buck. The net asset value is US$0.84. By paying US$0.88, it is 1.05x NAV only, compared to around 2x for Keppel DC Reit and around 6x for Equinix, which is the largest data centre Reit in the world. I believe this is a steal.
In conclusion, I would be trying my luck for this largest IPO in SGX of 2021, hopefully to get a slice of this data centre pie to gain a foothold in the digital economy and Metaverse.
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