Digital Core REIT has agreed to sell its interests in three North American data centers back to its sponsor Digital Realty, for gross proceeds of approximately USD 316 million, while simultaneously acquiring stakes in two Asia Pacific facilities for a combined investment of approximately USD 176 million, in a transaction that will mark the Singapore-listed trust's first entry into the Singaporean market.

The North American Sales

The divestment involves three assets spanning Toronto, Los Angeles, and Northern Virginia. Digital Core REIT will sell its 90 percent interest in 371 Gough Road in Toronto for CA$180 million, equivalent to approximately USD 127 million.

The Toronto facility, known as Digital Realty's YYZ10 data center, totals 120,040 square feet and 6.75 megawatts of capacity. Built in 1980 and renovated into a data center in 2015, the multi-tenant, single-story site sits on 7.6 acres.

The REIT will also sell its 90 percent interest in 200 North Nash Street in El Segundo, California for US$79 million.

The facility, operated by Digital Realty as its LAX11 data center, totals 113,606 square feet and was built in 1976 on a four-acre site.

The two-story building was previously set to be leased to Cyxtera until 2033, but that lease ended early following Cyxtera's bankruptcy and subsequent sale to Brookfield.

T

he third disposal involves a 39 percent interest in the 8217 Linton Hall Road facility in Bristow, Northern Virginia, which will be sold for USD 110 million. The single-story, 207,000-square-foot facility was built in 2001 and offers 9 megawatts of capacity.

Previously occupied by a Fortune 50 software company from 2005 through the end of this year, the site recently secured a 10-year agreement with an unnamed investment-grade global cloud service provider for the entire facility.

Digital Realty originally acquired the Linton Hall Road property in 2017 as part of its purchase of DuPont Fabros Technology.

The Asia Pacific Acquisitions

Proceeds from the sales will be used in part to fund two acquisitions in Asia Pacific. Digital Core REIT has agreed to acquire a 2.5 percent interest in 11 Loyang Close in Singapore from Digital Realty for S$87 million, equivalent to approximately US$68 million.

The Singapore facility, known as SIN12, is a five-story building totaling 365,000 square feet with 50 megawatts of capacity.

First announced in 2019 and launched in 2021, the site is currently 94 percent occupied. The second acquisition involves an additional 25 percent interest in Digital Osaka 3, also known as KIX12, from Digital Realty for approximately USD 108 million.

The purchase will increase Digital Core REIT's ownership stake in the Osaka facility to 45 percent. Digital Core REIT first acquired a 20 percent interest in the facility from Mitsubishi Corporation last year.

The Osaka data center was completed in July 2021 and offers 19.9 megawatts of IT load across 193,535 square feet. It is fully leased.

Use of Proceeds and Financial Structure

Of the approximately USD 140 million in net proceeds generated after the acquisition costs, around $117 million will be directed toward paying down debt. An additional amount of up to USD 20 million will be used to repurchase units on the open market.

The transaction structure reflects an effort by Digital Core REIT to reshape its portfolio and reduce leverage while expanding its geographic footprint into Asia Pacific markets where growth dynamics differ from those of more mature North American assets.

Strategic Context

Digital Core REIT was established by Digital Realty in 2021 as a Singapore-listed pure-play data center real estate investment trust.

It was seeded with a portfolio of ten data centers across the United States and Canada, covering locations in Northern Virginia, Northern California, Los Angeles, and Toronto, totaling more than 1.2 million square feet and 49 megawatts of capacity.

The transaction announced today represents a significant reconfiguration of that original portfolio, shifting exposure away from certain North American assets and toward markets in Southeast Asia and Japan.

Gregory S. Wright, chief investment officer of Digital Realty, said the transaction was intended to enhance Digital Core REIT's portfolio mix, leverage, and distribution per unit.

"Digital Core REIT was formed to capitalize on the enormous growth potential within the data center sector, which is now materializing in the midst of the sector's ongoing investment cycle," Wright said.

John J. Stewart, chief executive of Digital Core REIT Management Pte.

Ltd., the manager of the REIT, described the transaction as a pivotal step in expanding across the Asia Pacific region.

"This transaction marks our entry into Singapore and strengthens our presence in Japan," Stewart said. "This multi-faceted transaction reflects our Sponsor's firm commitment to Digital Core REIT's near- and long-term success and our own commitment to creating durable value for unitholders.

" The Singapore entry through the 11 Loyang Close acquisition, while representing only a 2.5 percent stake in the facility, establishes Digital Core REIT's presence in a market widely regarded as one of the most strategically significant data center hubs in Southeast Asia.