Digital Core REIT is selling its stake in several US data centers back to Digital Realty, and buying a stake in two more in Asia from the operator.

The company, a pure-play data center REIT listed in Singapore and sponsored by Digital Realty, announced today that it has reached an agreement to sell interests in three North American assets back to Digital Realty.

The firm will, in turn, use the proceeds to acquire partial interests in a data center in Singapore, up its stake in a data center in Osaka, pay down debt, and repurchase units on the open market.

The deal would see Digital Core REIT enter the Singaporean market for the first time.

The transaction would see Digital Core REIT sell its 90 percent interest in 371 Gough in Toronto for CA$180 million (US$127 million), sell its 90 percent interest in 200 N. Nash in Los Angeles for US$79 million; and the sale of a 39 percent interest in 8217 Linton Hall in Northern Virginia for US$110m.

In return, Digital Core REIT has agreed to acquire a 2.5 percent interest in 11 Loyang Close in Singapore from Digital Realty for S$87m (US$68m) and acquire an additional 25 percent interest in Digital Osaka 3 from Digital Realty for ¥17.6 billion ($108m), increasing its ownership stake to 45 percent.

The sales are expected to generate gross proceeds of approximately $316m. The purchases are expected to represent a total investment of approximately $176m. Around $117m of the $140m in net proceeds will be used to pay down debt, and up to $20m to repurchase units on the open market.

“With this transaction, we expect to tactically enhance Digital Core REIT’s portfolio mix, leverage and distribution per unit, in an effort to better position the REIT for the unprecedented opportunity we see ahead,” said Digital Realty chief investment officer, Gregory S. Wright. “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.

John J. Stewart, CEO of Digital Core REIT Management Pte. Ltd., the manager of Digital Core REIT, added: “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.”

Singapore-listed Digital Core REIT was set up by Digital Realty in 2021 to hold a number of its stabilized data centers. The company was seeded with a portfolio of ten data centers from Digital Realty across the US and Canada in Northern Virginia, Northern California, Los Angeles, and Toronto, totaling more than 1.2 million sq ft (111,484 sqm) and 49MW.

Located in Bristow, Virginia, the single-story 8217 Linton Hall Road facility was built in 2001 and totals 9MW across 207,000 sq ft (19,230 sqm). Previously occupied by a "Fortune 50 software company” from 2005 to the end of this year, Digital Core REIT recently secured a 10-year agreement with an unnamed “investment grade global cloud service provider” for the whole facility. The Linton Hall Road facility was acquired by Digital Realty in 2017 when it bought DuPont Fabros Technology. Previous reports suggest the site had been leased to Microsoft.

The data center at 371 Gough Road in Toronto, Ontario, totals 120,040 sq ft (11,152 sqm) and 6.75 MW. Set on 7.6-acres, the multi-tenant site was built in 1980 and renovated into a data center in 2015. Digital Realty operates the single-story site as its YYZ10 data center.

Meanwhile, 200 North Nash Street in El Segundo, California; 113,606 sq ft (10,554 sqm). Built in 1976 and sitting on 4 acres, Digital operates it as its LAX11 facility. The two-story site was previously set to be leased to Cyxtera until 2033, but the lease ended early after Cyxtera’s bankruptcy and sale to Brookfield.

First announced in 2019, Digital Realty launched its SIN12 facility at 11 Loyang Close in 2021. The five-story facility totals 50MW across 365,000 sq ft (33,910 sqm). According to Digital Core REIT, the site is 94 percent occupied.

Digital Core REIT first took a 20 percent interest in Digital Osaka 3 (aka KIX12) from Mitsubishi Corporation last year. The facility was completed in July 2021. It offers 19.9MW of IT load across 193,535 sq ft and is fully leased.