Tiger Singapore Weekly Focus: 2 Pure Play Data Centre REITs

Weekly Focus on S-REITs with exposure to data centre assets($KEPPEL DC REIT(AJBU.SI)$, $DigiCore Reit USD(DCRU.SI)$)

What data centres?

Data centres are large IT infrastructure facilities that are used to store, protect and manage large amount of digital content.

In a managed data centre, companies lease dedicated servers, storage and networking hardware from the data centre provider, and the data centre provider handles the administration, monitoring and management for the client company.

Similar to most real estate investment trusts (REITs), data centre REITs rent space in their facilities to tenants. Data centre REITs usually rent space to multiple tenants or they can rent the entire facility to one tenant. The tenants use the space to house their networking equipment and servers, allowing them to process and store data.

Why data centre REITs?

Data centre REITs often generate steady cash flows and are considered a safer way for investors looking for reliable returns and allow them to invest in the booming data centre industry without buying into the physical assets such as a industrial storage space and management of client which they rent their space to.

All companies with a digital footprint will require data centres to store and manage their data.

2 pure play data centre REITs

$KEPPEL DC REIT(AJBU.SI)$  is a Singapore-based real estate investment trust (REIT). It was established with the principal investment strategy of
investing in a portfolio of income-producing real estate assets that are used primarily for data centre purposes, with an initial focus on Asia Pacific and
Europe.

Keppel DC Reit was the first pure data centre play to list in Singapore and was highly sought after, with share prices reaching a high of S$3.04

Keppel DC Reit has a portfolio of 23 data centres as at Dec 31, 2022, with AUM of S$3.7 billion.

In addition, KDCR benefits from the support of its sponsor, which provides it with pipeline assets and DC development capabilities to further grow its portfolio.

$DigiCore Reit USD(DCRU.SI)$ is the only pure-play data centre Singapore sponsored by a global pure-play listed data centre owner and operator, Digital Realty.

Digital Core REIT has a portfolio of 11 data centres as at Dec 31, 2022, with AUM of S$1.58 billion. Its presence in key markets such as US, Canada and the recently added centre in Frankfurt will allow it to continue to benefits from the robust demand for data centres.

DCREIT offers an attractive opportunity to ride on the highly attractive growth seen in data centre market which is fuelled by the digitization of the world economy.

Source: Bloomberg, as of 15 March 2023

Conclusion

With more companies digitalising and the need to process and store big data, investing in a data centre REITs allow investors to look for profits and also to diversify their portfolio outside of traditional REITs.

Another benefit of data center REITs is that they tend to be relatively recession-proof. That is because most tenants sign long-term contracts for space in a data center, allowing data center REITs to generate recurring revenue.

Important Information

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