Consolidation and Currency Hedges

Every time you stream high-definition content, execute a high-frequency trade, or sync a document to the cloud, you are tethered to the physical backbone of the global economy: the data center. While the “digital economy” is often discussed in ethereal terms, its existence is entirely dependent on mission-critical facilities packed with servers, sophisticated cooling systems, and massive power arrays.

For investors seeking to capitalize on this infrastructure, Digital Core REIT (DCR) offers a unique vantage point. As the only pure-play data center Singapore REIT (S-REIT) sponsored by Digital Realty—the world’s largest data center owner and operator—DCR is a direct proxy for the digital world’s growth. Its full-year 2025 results reveal a narrative of aggressive capital allocation to high-growth Tier-1 markets, marked by a strategic pivot from its North American origins toward pivotal hubs in Frankfurt and Osaka.

The 72% Revenue Surge: The “Frankfurt Factor”

The headline achievement for the financial year ended 31 December 2025 is a massive leap in top-line performance. Digital Core REIT reported gross revenue of US176.2 million, a 72.2% increase over the US102.3 million recorded in FY 2024.

For the institutional analyst, the depth of this growth lies in a technical accounting shift. This surge was not merely organic; it was driven by the acquisition and subsequent consolidation of the Frankfurt facility. Previously accounted for as an associate under “equity accounting,” the move to full consolidation post-acquisition in late 2024 fundamentally scaled the REIT’s line items.

However, this scale brought a significant expansion in the cost base. Property expenses rose by 116.1%, climbing from US40.4 million to US87.4 million. A granular look at the income statement reveals that utilities were the primary catalyst, jumping from US15.9 million to US44.7 million—a reflection of the high energy intensity required to operate these mission-critical assets. As management noted in the financial report:

“The year-over-year increase in gross revenue, property expenses, and net property income is largely attributable to the acquisition and consolidation of the Frankfurt facility.”

Expanding the Footprint: Why Osaka is the New Strategic Play

While Germany drove the 2025 revenue spike, Japan represents the REIT’s latest move to increase geographic exposure to the Asia-Pacific region. On 26 March 2025, Digital Core REIT completed the acquisition of a 20% equity interest in Digital Osaka 3 for a gross purchase consideration of JPY13 billion (approximately US$86.7 million). This acquisition brings the REIT’s Japanese exposure to two Tier-1 assets, joining its existing 20% interest in Digital Osaka 2.

The financing of this deal demonstrates sophisticated capital management. The acquisition was funded through Yen-denominated Notes due in 2030. By aligning Yen-denominated debt with Yen-denominated assets, the REIT utilizes a “natural hedge.” This strategy, which also extends to its Euro-denominated loans, was instrumental in maintaining the Group’s Net Asset Value (NAV) stability at US$0.80 per unit, effectively neutralizing the impact of currency volatility on the balance sheet.

Decoding the Profit Paradox: Why “Lower” Profits Aren’t What They Seem

A cursory glance at the bottom line might suggest a decline in performance, as profit after tax fell from US265.5 million in FY 2024 to US66.8 million in FY 2025. However, this is a “profit paradox” rooted in non-cash fair value adjustments.

The 2024 figure was heavily influenced by a substantial US251.6 million net fair value gain on investment properties. In contrast, the 2025 gain was a more conservative US22 million. When stripping away these non-cash appraisals to view operational strength, the picture is much brighter: Net Property Income (NPI) rose 43.5% year-over-year to US$88.7 million. This confirms that the REIT’s core business of leasing mission-critical space remains exceptionally robust.

The Anchor of Stability: A Constant Distribution in a Shifting Market

In a period defined by portfolio consolidation and global expansion, Digital Core REIT delivered the consistency prized by income investors. Despite the heavy acquisition activity, the Distribution per Unit (DPU) remained rock-solid.

Financial Year	Distribution per Unit (DPU) in US Cents	Year-over-Year Growth (%)
2024	3.60	–
2025	3.60	0.0%

This stability is a result of the REIT’s “90% Rule”—a policy to distribute at least 90% of its annual distributable income. While the DPU remained flat, the underlying taxable income available for distribution actually grew by 1.9%, rising from US46.0 million to US46.8 million. This modest growth ensures that the payout is well-covered even as the REIT manages its global expansion and debt profile.

Conclusion: A Forward-Looking Outlook

Digital Core REIT enters 2026 with a formidable US$1.8 billion portfolio of freehold facilities located in the world’s most vital data hubs, from Northern Virginia and Silicon Valley to Frankfurt and Osaka. These are no longer mere real estate holdings; they are the essential infrastructure of the 21st century.

As the global digital economy continues to scale and data consumption accelerates, the “mission-critical” nature of these assets is only heightened. It raises a fundamental question for the modern investor: As our reliance on data becomes absolute, are these high-tech facilities becoming the most essential “utility” of our age? Based on the REIT’s 2025 performance, the market’s trajectory suggests the answer is a resounding yes.

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