Perpetual Global Partner Vehicle for Stabilized ‘Core’ Data Centers and Revenue Producers
AUSTIN, Texas, December 6, 2021 / PRNewswire / – Digital Realty (NYSE: DLR), the world’s largest provider of cloud and carrier neutral data center, colocation and interconnect solutions, today announced the successful listing of Digital Core REIT as a listed autonomous vehicle on the Singapore Stock Exchange. Digital Realty contributed a 90% stake in a portfolio of 10 assets focused on the leading data center markets in the United States and Canada estimated at $ 1.4 billion. The initial IPO portfolio is fully leased to a premier and growing client list with a weighted average remaining lease term of more than six years. Digital Core REIT is sponsored and externally managed by Digital Realty to provide operational support for the new vehicle and to ensure a seamless customer experience. Digital Realty will collect fees for the management of assets and properties as well as for acquisitions, dispositions and development.
“We are delighted with the successful launch of this new vehicle, which is uniquely positioned to help Digital Realty create value by providing a perpetual capital partner for core assets, while acting as an extension of our global platform. and enabling customers to continue to rely on Digital Realty’s track record of operational excellence, ”said Digital Realty CEO A. William Stein. “We have a strong presence in Singapore, which houses our regional APAC headquarters as well as our flagship factory in Jurong and two recently completed projects in Loyang. We are excited to be able to offer our global data center expertise to a broader audience of regional investors seeking exposure to key data center investment opportunities. “
Transaction delivers key strategic and financial benefits for digital real estate
Perpetual Capital Partner: This offering represents the most advanced advancement to date in the continued evolution of Digital Realty’s main sources of capital. Unlike private equity partners with relatively shorter limited life holding periods, Digital Core REIT should be an ideal perpetual equity partner, with a long-term investment horizon closely reflecting Digital Realty’s goals. Digital Core REIT’s mandate to invest in stabilized, revenue-generating data centers is well suited to meet the robust and diverse demand from large and growing customers.
Transparent customer experience: The new vehicle will allow Digital Realty to continue to provide a seamless customer experience. Digital Core REIT assets are fully integrated with Digital Realty’s global platform, ensuring consistency in deployment and operations, as well as connectivity for large and growing customers.
Partner vehicle for incremental mergers and acquisitions: Digital Realty has granted a global right of first refusal on assets that meet Digital Core REIT’s mandate to invest in stabilized, income-producing data centers that are over 90% occupied with no significant capital expenditure requirement at during the first two years. Digital Realty plans to bring additional stabilized core assets to Digital Core REIT in the future. Additionally, Digital Core REIT has the ability to pursue acquisitions with third parties and will have the potential to co-invest alongside Digital Realty in future investing activities.
Alignment of interests: Digital Realty expects to maintain a 10% working interest in each of Digital Core REIT’s assets. Digital Realty’s continued involvement and stake in assets underscores the alignment of interests between stakeholders in both organizations and should preserve a seamless customer experience and help maximize asset value.
“We are deeply grateful for the warm welcome we received at Singapore“said the CEO of Digital Core REIT John stewart. “We aspire to be the first pure-play data center FPI listed in Singapore, and especially given the strong backing from the world’s largest data center owner and operator, we are excited about the opportunity to create lasting value for all stakeholders by capitalizing on the growth of the digital economy. “
Leadership and corporate governance
Digital Core REIT is led by an experienced management team and board of directors with extensive experience in the disciplines of data center, real estate investing, finance, accounting and capital markets. John stewart, who previously served as Senior Vice President, Investor Relations, Tax and Treasury for Digital Realty, is currently Managing Director of Digital Core REIT. Daniel Tith, who was previously EMEA Finance Manager for Digital Realty, is Chief Financial Officer of Digital Core REIT. The Board of Directors of Digital Core REIT consists of five members, including three independent directors and two representatives of Digital Realty. Jeffrey S. Tapley, who is responsible for the overall portfolio management at Digital Realty, is Chairman of the Board.
The initial IPO portfolio was valued by an independent third-party appraiser at approximately $ 1.4 billion at a capping rate of 4.25%. Digital Realty retains a 10% working interest in each of the assets of the initial IPO portfolio and contributes the remaining 90% interest to Digital Core REIT. The purchase price of this 90% stake is approximately $ 1.3 billion. Digital Core REIT organized $ 550 million unsecured credit facilities, consisting of a $ 200 million unused revolving credit facility and a $ 350 million fully funded term loan, representing an initial leverage of approximately 27%.
Digital Core REIT will have an initial market capitalization of approximately $ 990 million. The size of the initial public offering was $ 600 million. In addition, Digital Core REIT has granted the Underwriters a $ 47 million possibility of over-allocation. Assuming the over-allotment option is exercised, the initial free float should be around $ 647 million. Digital Realty will keep the rest $ 343 million, representing an approximate 35% stake in Digital Core REIT, assuming the exercise of the over-allotment option. Digital Realty’s interest in Digital Core REIT is expected to be accounted for as an unconsolidated investment.
Net of transaction costs and its retained ownership rights, Digital Realty expects to generate net proceeds of approximately $ 960 million, assuming the over-allotment option is exercised. The proceeds of the transaction will initially be used to repay debt and will ultimately be used to fund future investing activities.
Digital Realty will receive an asset management fee of 0.5% of the “deposited value” or total assets; property management fees of 2.0% of gross income; a performance fee of 3.5% of “net property income” or net operating income; and an acquisition charge of 1.0%.
BofA Securities, Citigroup and DBS acted as Joint Issue Managers, Global Coordinators, Bookrunners and Underwriters, while BNP Paribas, OCBC Bank and UOB acted as co-managers of the offer. Allen & Gledhill served as legal counsel to Digital Realty on the transaction.
About Digital Realty
Digital Realty supports the world’s leading businesses and service providers with a full suite of data center, colocation and interconnection solutions. PlatformDIGITAL®, the enterprise’s global data center platform, provides customers with a reliable foundation and proven Pervasive Datacenter Architecture (PDx ™) solution methodology to scale digital business and effectively manage gravity challenges Datas. Digital Realty’s global data center footprint enables customers to access the connected communities that matter to them with more than 280 installations in 49 subways across 25 countries on six continents. For more information, please visit digitalrealty.com or follow us on LinkedIn and Twitter.
About the Digital Core REIT
Digital Core REIT (SGX: DCRU) is a leading pure-play data center FPI listed in Singapore and sponsored by Digital Realty, the world’s largest owner and operator of data centers. Digital Core REIT aims to create long-term, sustainable value for all stakeholders through ownership of a stabilized and diverse portfolio of mission-critical data center facilities focused in select global markets. For more information, please visit digitalcorereit.com.
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Safe Harbor Declaration
This press release contains forward-looking statements based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause results to differ materially from actual results, including statements relating to the centers market. data, Digital Realty strategy, expected growth of digital economy, customer demand, expected benefits, Digital Core REIT sponsorship and management, Singapore REIT market, expectations for the Singapore economy, and PlatformDIGITAL®. For a list and description of risks and uncertainties, please see company reports and other documents filed with the United States Securities and Exchange Commission. The company disclaims any intention or obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
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SOURCE Digital Realty