Digital Core REIT Review @ 2 May 2023

Basic Profile & Key Statistics

• Main Sector(s): Industrial
• Country(s) with Assets: United States & Canada
• No. of Properties (exclude development/associate/fund): 11

Key Indicators

Performance Highlight

Gross revenue has improved slightly YoY, however, NPI and distributable income declined YoY mainly due to higher property expenses, finance expenses as well as tax expenses.

Related Parties Shareholding

• REIT Sponsor's Shareholding: Above median by 20% or more
• REIT Manager's Shareholding: Below median by 20% or more
• Directors of REIT Manager's Shareholding: Below median by 20% or more

Lease Profile

• Occupancy: ± 5% from median
• WALE: ± 10% from median
• Highest Lease Expiry within 5 Years: Above median by 20% or more; Falls in 2025
• Weighted Average Land Lease Expiry: 100% Freehold Properties

Debt Profile

• Gearing Ratio: Below median by 10% or more
• Cost of Debt: Above median by 10% or more 
• Fixed Rate Debt %: ± 10% from median
• Unsecured Debt %: 100%
• WADM: Above median by 20% or more
• Highest Debt Maturity within 5 Years: Above median by 20% or more; Falls in 2026
• Interest Coverage Ratio: Above median for more than 20%

Diversification Profile

• Top Geographical Contribution: Below median by 20% or more
• Top Property Contribution: ± 10% from median
• Top 5 Properties' Contribution: Above median by 20% or more
• Top Tenant Contribution: Above median by 20% or more
• Top 10 Tenants' Contribution: Above median by 20% or more

Key Financial Metrics

• Property Yield: ± 10% from median
• Management Fees over Operating Distributable Income: Above median by 20% or more; $4.22 distribution for every dollar paid 
• Operating Distributable Income on Capital: Below median by 10% or more
• Operating Distributable Income Margin: Below median by 20% or more
• Operating Distribution Proportion: Below median by 10% or more

DPU Breakdown

• TTM DPU Breakdown
• 80.9% from Operation
• 19.1% from Management Fees Paid in Units

Trends

* DPU in 4Q 2021 is adjusted to 3 months DPU.

• Slight Downtrend: NAV per Unit, Occupancy, Property Yield
• Downtrend - DPU from Operation, Interest Coverage Ratio, Operating Distributable Income on Capital, Operating Distributable Income Margin

Relative Valuation

• P/NAV: Below -1SD for 1y & 3y
• Dividend Yield: Above +2SD for 1y & 3y

Author's Opinion

Favorable	Less Favorable
High REIT Sponsor's Shareholding	Low REIT Manager's Shareholding
100% Freehold Properties	Low Directors of REIT Manager's Shareholding
Low Gearing Ratio	Concentrated Lease Expiry
100% Unsecured Debt	High Cost of Debt
Long WADM	Concentrated Debt Maturity
High Interest Coverage Ratio	High Top 5 Properties' Contribution
Low Top Geographical Contribution	High Top Tenant & Top 10 Tenants' Contributions
	Non-Competitive Management Fees
	Low Operating Distributable Income on Capital
	Low Operating Distributable Income Margin
	Low Operating Distribution Proportion
	DPU from Operation Downtrend
	Interest Coverage Ratio Downtrend
	Operating Distributable Income on Capital Downtrend
	Operating Distributable Income Margin Downtrend

Performance has improved slightly as compared to the previous quarter. With regard to the vacancy in Toronto resulting from Sungard's bankruptcy, the manager has successfully extended 14 short-term colocation contracts and has replaced two-thirds of Sungard’s rental obligation for 2023. There is no significant update regarding Cyxtera's credit rating downgrading event, which is the second largest tenant that accounted for 22.4% of annualized rent.

For more information, check out:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and details of Singapore REIT

REIT Review - List of previous REIT review posts

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*Disclaimer: The information presented on this blog is for educational and informational purposes only. The materials, including research and opinions, are based solely on my own findings and should not be considered as professional financial advice or a definitive statement of fact. I cannot guarantee the accuracy, completeness, or reliability of the information provided. I shall not be held liable for any errors, omissions, or losses that may occur as a result of using the information presented on this blog. It should be noted that the information presented on this blog does not constitute a buy, sell, or hold recommendation for any security. It is crucial to conduct your own thorough research and due diligence before making any investment decisions.