Digital Core Reit’s H1 DPU falls 6.8% to US$0.0192 after two tenants go bust

DIGITAL Core Reit’s distribution per unit sank 6.8 per cent to US$0.0192 for its first half-year ended June, from US$0.0206 the year before, as a result of lower rental income.

Two of its tenants filed for bankruptcy, which caused them to fall behind on rent payments. One of these customers has since vacated the data centre it was occupying in Toronto, Canada, and has been replaced by other tenants, the Reit manager said on Thursday (Jul 27) in a bourse filing. 

The other tenant, which The Business Times understands is Cyxtera, a Nasdaq-listed data centre operator, has remained current on rental obligations for July.

However, rent for June has not been paid due to administrative claim procedures, but is expected to be collected. 

Net property income fell 0.7 per cent to US$35.1 million on higher property taxes, while lower utilities expenses supported a 1.1 per cent increase in gross revenue for the first half of the year to US$53.4 million.

Income available for distribution declined 7.6 per cent to US$21.5 million, down from US$23.2 million previously, as finance and tax expenses for the first half of the year were higher than before due to a rise in interest rates in the United States since April 2022. 

The distribution will be paid on or before Sep 28, the manager said. 

Preserving the flexibility of its balance sheet, while prudently utilising debt headroom to execute upon accretive investment opportunities will be its key focus, it said. 

For the first half of 2023, aggregate leverage stood at 34.2 per cent while the weighted average debt maturity was approximately 3.4 years. 

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As at Jun 30, Digital Core Reit’s portfolio is 97 per cent occupied with a weighted average lease expiry of approximately 3.9 years.

The manager said it intends to expand its asset base and diversify its customers.