Digital Core Reit acquires additional 10% interest in Osaka asset for 7.7 billion yen

DIGITAL Core Real Estate Investment Trust (Reit) has acquired an additional 10 per cent interest in a data centre located in Osaka, Japan, for 7.7 billion yen (S$68.9 million).

Its wholly owned subsidiary entered into a share purchase agreement with Japanese conglomerate Mitsubishi Corporation on Mar 29 and completed the acquisition on the same day, the Reit manager said in a bourse filing on Monday (Apr 1). 

The consideration, which is based on an agreed property value of 77.3 billion yen, takes into account the estimated net assets and liabilities of the data centre, including 18 billion yen in onshore Japanese yen-denominated bonds. 

The data centre is a freehold facility comprising 114,940 square feet of net rentable space with an occupancy of 95 per cent, as at Dec 31, 2023. The manager noted that the facility is predominantly leased to leading global cloud providers. 

It expects the acquisition to be distribution per unit-accretive for unitholders, at a rate of 2.3 per cent, as well as net asset value-neutral, based on pro-forma estimates assuming the acquisition was completed on Jan 1, 2023. 

The manager plans to finance the acquisition using a combination of proceeds from a private placement that closed on Feb 8, 2024, and yen-denominated borrowings via a new Japanese yen tranche on its unsecured term loan facility. 

In a separate statement, the manager said the Reit on Mar 26 completed an amendment to its multi-currency credit facilities to arrange for a new 11.25 billion yen-denominated term loan. 

This was to provide intermediate-term financing for its investments in the Osaka data centre, including the additional 10 per cent interest acquired on Mar 29, 2024, and the previous 10 per cent acquired on Nov 1, 2023. 

Subsequently, the Reit entered into a swap agreement to fix the rate on the portion of the borrowings at an all-in borrowing cost of 1.5 per cent for four years. 

The manager added that the amendment to the agreement allowed the Reit to pay down outstanding borrowings on its US dollar-denominated term loan, while allowing it to draw from the term loan as needed. 

Units of Digital Core Reit : DCRU 0% were trading flat at US$0.60, after the announcement.