Digital Core REIT (DCRU) H2 2023 earnings summary

Executive summary

• FY23 portfolio: $1.4bn AUM, 12 data centres, 96.6% occupancy (reported as 97%), 2.8-year WALE; annual DPU was 3.70 U.S. cents.

• FY23 property revaluations drove a $116.7m reported loss; January 2024 Silicon Valley sales generated US$160.2m gross proceeds and reduced pro forma leverage to 33.5%.

Financial highlights

• FY23 revenue was US$102.6m, down 4.8% YoY; net property income was US$63.1m, down 9.1%.

• Distributable income was US$41.5m versus US$44.8m in FY22, down 7.3% YoY and 17.8% below FY23 forecast of US$50.5m.

• FY23 DPU was 3.70 U.S. cents versus 3.98 cents in FY22 and 4.40 cents forecast; 2H DPU was 1.78 cents.

• Reported loss was US$116.7m versus US$3.6m profit in FY22; net loss attributable to unitholders was US$108.6m.

• Property expenses rose 3.1% YoY to US$39.5m, 1.6% below forecast.

Outlook and guidance

• Strategic priorities include growth in core global markets, improved portfolio quality, greater scale and diversification, and accretive investment through vacancy lease-up.

• Osaka acquisition and proposed Frankfurt and Osaka stake increases were presented as accretive initiatives; cumulative pro forma DPU was shown at 3.50 cents.

• Pro forma portfolio plan targets 32% international exposure and $1.6bn value, with organic growth opportunities from Frankfurt and Osaka vacancies.

• Management cited an industry-leading acquisition pipeline and favourable fundamentals for 2024; it said rate tightening appeared to be levelling off as transaction cap rates edged up.