Singapore Exchange (SGX: S68), or SGX, is enjoying a breath of fresh air as more listing aspirants show up on its doorstep.
Last week, Info-Tech Systems (SGX: ITS) became SGX’s first mainboard IPO in two years when it floated its shares.
Now, NTT Group (TYO: 9432) from Japan is sponsoring a new data centre REIT called NTT DC REIT.
600 million units are on offer at US$1 per unit, with 30 million units reserved for the public at S$1.276 per unit.
Once NTT DC REIT goes public, it will be the third pure-play data centre REIT listed on the SGX, following Keppel DC REIT (SGX: AJBU) and Digital Core REIT (SGX: DCRU).
Income-seeking investors may be interested in learning more about this REIT, including its yield and growth prospects.
NTT DC REIT’s starting portfolio
NTT Group is seeding NTT DC REIT with six starting assets with a total appraised value of around US$1.6 billion.
Four data centres are located in the US (California and Northern Virginia), one in Vienna (Austria), and the sixth in Singapore.
All the assets are freehold except for the Singapore data centre, which is on leasehold land expiring in 2070.
The portfolio enjoys a portfolio occupancy rate of 94.3% and has a weighted average lease expiry (WALE) of 4.8 years based on monthly rent as of 31 December 2024.
The sponsor, NTT Group, is a major global IT services and telecommunications group with a global data centre business.
This global data centre division is the third-largest data centre provider globally, excluding China.
Data centre and tenant mix
Digging into the details of the portfolio, around 49% of the REIT’s customers (by monthly base rent) are colocation, while the remaining 51% are hyperscale customers.
Colocation customers typically accept higher prices, and their leases contain built-in rental escalation clauses.
Close to three-quarters of NTT DC REIT’s contracts have fixed escalations of 3.3% on average, with 3% of the remaining contracts being indexed to inflation.
The top 10 tenants (excluding NTT Group) make up 62.6% of the total monthly base rent.
However, there is customer concentration risk for the REIT as its top tenant (a Fortune 100 US automotive company) makes up 31.5% of the base rent.
The next two customers (Fortune 100 software companies) take up 9.3% and 6.6% of the monthly base rent, respectively.
This means that NTT DC REIT’s top three tenants make up 47.4% of the total monthly base rent.
Also, NTT DC REIT’s lease expiry profile shows no single fiscal year (note: the REIT has a 31 March fiscal year-end) with expiries exceeding 20% all the way up to fiscal 2030 (FY2030).
However, FY2031 has 45.8% of expiries, but REITs typically negotiate with tenants in advance before their leases expire.
Reasonable gearing
NTT DC REIT will come to market with a reasonable gearing level of 35%.
This gearing provides ample headroom for the REIT to pursue yield-accretive acquisitions.
At 35%, the REIT has a US$450 million debt headroom to tap into.
It also has no debt maturities in the next three years, but the cost of debt for the initial portfolio was not disclosed.
Brand-name cornerstone investors
NTT DC REIT also attracted reputable cornerstone investors.
These investors will subscribe for more than 172 million units of the REIT, representing 16.8% of all units.
GIC will subscribe for more than 100 million units and be a substantial shareholder with a 9.8% stake in the data centre REIT.
It will also be the second-largest unitholder after sponsor NTT Group.
Other cornerstone investors include AM Squared, Viridian Asset Management, and UBS Group (SWX: UBSG).
Prospective distribution yield
Based on the offer price, NTT DC REIT has an indicative distribution yield of 7.5%.
This yield is based on the annualised forecast year of FY2026 from the period 1 July 2025 to 31 March 2026 (i.e. nine months).
The manager believes that the REIT can source high-quality, accretive acquisitions supported by its sponsor’s capital recycling strategy.
Colocation revenue is expected to be driven by built-in rental escalations of between 1.5% to 7% from current leases.
A strong sponsor with a ready pipeline of assets
NTT Group also has an extensive portfolio and will provide NTT DC REIT with a right-of-first-refusal agreement to a pipeline of over 2,000 MW of IT capacity.
The diagram below shows how NTT DC REIT plans to grow through sponsor-divested asset acquisitions.
Around 130 MW of data centres have been identified for near-term acquisition, allowing the REIT to potentially double in size and capacity from the current 90 MW (at IPO) to more than 200 MW.
Get Smart: Indicative timeline for this IPO
The IPO opens for subscription on 7 July 2025 at 9 p.m. and will close on 10 July 2025 at 12 noon.
Interested investors can apply for this IPO at ATMs and internet banking websites of DBS Group (SGX: D05), United Overseas Bank (SGX: U11), or UOB, and OCBC Ltd (SGX: O39).
The mobile banking websites for DBS and UOB can also be used to apply for this IPO.
Shares of NTT DC REIT will begin trading on 14 July at 2 p.m.
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Disclosure: Royston Yang owns shares of Keppel DC REIT, DBS Group, Singapore Exchange and Digital Core REIT.
