Digital Core REIT Sells US Data Center Stakes to Digital Realty, Acquires Asian Assets

Digital Core REIT, a Singapore-listed data center real estate investment trust sponsored by Digital Realty, has agreed to sell its interests in three North American data centers back to its sponsor while using the proceeds to acquire stakes in two Asian facilities. The transaction, announced today, marks the REIT's first entry into the Singapore market and deepens its presence in Japan.

The deal involves the sale of a 90 percent interest in 371 Gough Road in Toronto for CA$180 million (US$127 million), a 90 percent interest in 200 N. Nash Street in Los Angeles for US$79 million, and a 39 percent interest in 8217 Linton Hall Road in Northern Virginia for US$110 million. In return, Digital Core REIT will acquire a 2.5 percent interest in 11 Loyang Close in Singapore from Digital Realty for S$87 million (US$68 million) and an additional 25 percent interest in Digital Osaka 3 for ¥17.6 billion (US$108 million), increasing its ownership in the Japanese facility to 45 percent.

The sales are expected to generate gross proceeds of approximately $316 million, while the acquisitions represent a total investment of roughly $176 million. Of the $140 million in net proceeds, about $117 million will be used to pay down debt, with up to $20 million allocated for unit repurchases on the open market.

Gregory S. Wright, chief investment officer of Digital Realty, said the transaction is designed to tactically enhance the 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," he noted.

John J. Stewart, CEO of Digital Core REIT Management Pte. Ltd., highlighted the strategic significance of the move. "This transaction marks our entry into Singapore and strengthens our presence in Japan – a pivotal step in our strategy to expand in the Asia Pacific region. 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," he said.

Digital Core REIT was established by Digital Realty in 2021 to hold a portfolio of stabilized data centers. The REIT was seeded with ten facilities across the US and Canada, totaling more than 1.2 million square feet and 49MW of capacity. The properties being sold include the 8217 Linton Hall Road facility in Bristow, Virginia, a 9MW single-story data center built in 2001, which recently secured a 10-year lease with an unnamed investment-grade global cloud service provider. The 371 Gough Road site in Toronto, totaling 120,040 square feet and 6.75MW, was renovated into a data center in 2015 and operates as Digital Realty's YYZ10 facility. The 200 N. Nash Street property in El Segundo, California, spans 113,606 square feet and operates as LAX11; its previous tenant, Cyxtera, ended its lease early following bankruptcy and sale to Brookfield.

On the acquisition side, the 11 Loyang Close facility in Singapore, known as SIN12, was launched by Digital Realty in 2021 and totals 50MW across 365,000 square feet. The five-story facility is currently 94 percent occupied. Digital Core REIT first acquired a 20 percent interest in Digital Osaka 3, also known as KIX12, from Mitsubishi Corporation last year. The Japanese facility, completed in July 2021, offers 19.9MW of IT load across 193,535 square feet and is fully leased.

The transaction reflects a broader trend of data center REITs rebalancing portfolios to align with regional demand shifts and capitalize on growth in Asia Pacific markets. By recycling capital from mature North American assets into faster-growing Asian markets, Digital Core REIT aims to improve its financial position while expanding its geographic footprint.