Digital Core REIT Announces Major Loan Refinancing, Upsizing Credit Facilities to Drive Growth
Lim & Tan Securities
Daily Review | 09 October 2024
Digital Core REIT, a leading pure-play data centre real estate investment trust (REIT) listed in Singapore and sponsored by Digital Realty (NYSE: DLR), has made a significant move by recasting its loan facilities. The REIT, trading under the ticker symbol DCRU at US$0.58, announced the recasting of US$716 million worth of loan facilities. This refinancing is a major step for Digital Core REIT in terms of enhancing its financial flexibility and preparing for future growth.
Details of the Loan Refinancing
The refinanced loan facilities consist of three key components:
- US$363 million senior unsecured multicurrency term loan facility, maturing in 2030.
- €70 million (approximately US$78 million) senior unsecured term loan facility, maturing in 2029.
- US$275 million senior unsecured revolving multicurrency loan facility, maturing in 2029, with two six-month extension options.
These facilities were recast primarily to refinance the REIT’s existing US$703 million term loan and multicurrency revolving credit loan facilities. The refinancing extends the maturity dates of the loans by approximately three years, giving the REIT additional breathing room for financial planning. The revolving multicurrency loan facility was also upsized by US$75 million, expanding from the previous US$200 million limit. This facility now allows borrowing in multiple currencies, including U.S. dollars, Japanese yen, euros, Canadian dollars, Singapore dollars, and British pounds.
Key Benefits and Strategic Importance
The refinancing offers several strategic benefits for Digital Core REIT. According to CEO John J. Stewart, this move represents a “significant milestone” for the company, demonstrating the continued confidence of their lending partners in Digital Core REIT’s financial health and the strong fundamentals of the data centre sector. Stewart highlighted that this refinancing provides the REIT with increased financial flexibility, allowing it to continue executing accretive investments in data centres, expand its asset base, and diversify geographically and across its customer base.
The REIT’s CFO, Dave Craft, also acknowledged the vital role played by Citigroup, BofA Securities, and DBS Bank, who acted as mandated lead arrangers and bookrunners for the refinancing and successful syndication of the facilities. The ability to increase the facilities by up to $500 million adds another layer of financial flexibility, which could be critical for the REIT’s future acquisition strategy.
Financial Metrics and Valuation
At a share price of US$0.58, Digital Core REIT is capitalized at approximately US$754 million, offering a 6% yield. It currently trades at 0.8 times book value, suggesting that the stock remains undervalued relative to its underlying assets. According to Bloomberg’s consensus target price of US$0.76, the REIT presents an upside potential of 31%, making it an attractive prospect for investors looking to capitalize on consistent share buybacks and undemanding valuations.
Conclusion
Digital Core REIT’s proactive approach to refinancing and upsizing its loan facilities positions the company well for future growth in the data centre sector. With strong support from global lenders and increased financial flexibility, the REIT is well-positioned to expand its portfolio and enhance shareholder value. For investors, the company’s attractive valuation and consistent returns make it a compelling investment opportunity in the growing digital infrastructure space.
Lim & Tan Securities
Daily Review | 09 October 2024
