Digital Realty investment fund expands stake in Frankfurt data centre

A real estate investment fund sponsored by Digital Realty, Digital Core REIT, is set to increase its stake in a data centre in Frankfurt, Germany.

The Digital Realty sponsored Fund is proposing to acquire an additional 24.9% interest in the Frankfurt Wilhelm-Fay-Straße 15 and Wilhelm-Fay-Straße 24 for €117 million ($128.7 million), raising its holding to 49.9%.

The Strait Times reported for the proposed transaction worth £133.5 ($170.7 million) to proceed, it must first receive approval from the unit holders.

Digital Core Reit Management is the manager of the data centre real estate investment trust (REIT). In a regulatory filing on 6 March, it stated that raising its stake in the freehold data centre in Frankfurt is expected to be approximately 3.2% accretive to the annual distribution per unit.

The manager intends to use funds from selling Silicon Valley properties and a portion of the proceeds from a private placement in February to cover the acquisition cost. The private placement, which raised $117 million (S$156.5 million)facilitated this.

Post-acquisition, the portfolio’s credit quality is expected to improve, with annual rent contributions from investment-grade customers rising from 78% in 2023 to 87%. 

The Frankfurt Data Centre

Launched in 2017, the Frankfurt data centre spans 41,765 sqm and 34 MW, with a high occupancy rate of 92% among prestigious clients.

Digital Core REIT initially acquired a 25% stake in the facility in 2022, with plans to increase its ownership to 29.9% by November 2023 and subsequently expand by an additional 4.9% in Q1 2024.

Through its subsidiary, Singapore Sub 5, Digital Core REIT holds the option to further increase its ownership in the facility, potentially reaching ownership levels between 50.1% and 89.9%.

Established by Digital Realty, Singapore-listed Digital Core REIT was formed to manage a collection of stabilised data centres.

In December Digital Realty and asset manager, Blackstone, announced a £5.5 billion ($7 billion) joint venture to develop four data centre campuses across Frankfurt, Paris, and Northern Virginia.

Led by Blackstone’s Infrastructure, Real Estate, and Tactical Opportunities funds, the venture is expected to provide a total capacity of 500MW to accommodate 10 planned data centres.

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