‘Not perfect timing’: NTT DC Reit launches biggest S-Reit IPO in over a decade to raise US$773 million

[SINGAPORE] The manager of NTT DC Reit believes the timing is “not perfect” for an initial public offering (IPO) as the market is still not stable. But it is powering ahead with the biggest IPO of a Singapore real estate investment trust (Reit) in over a decade, as it is in it for the long haul.

“If this is one time trial to squeeze money, maybe we don’t take this IPO at this moment,” said Yutaka Torigoe, chief executive officer of the Reit manager, in a briefing on Monday (Jul 7). “But this IPO is a continuous, sustainable development of our capital recycling system. This is a very long-term project for NTT Group, so we dare to start this project now.”

The Reit manager on Monday launched its IPO, with NTT DC Reit listing over a billion units on the mainboard of the Singapore bourse to raise gross proceeds of US$773 million.

There are nearly 600 million units on offer, comprising US$1 per unit for 569.9 million units in its international placement, and 30 million units at S$1.276 per unit for the Singapore public offer.

Concurrent with, but separate from the offering, a group of cornerstone investors will subscribe to over 172 million units in total, representing 16.8 per cent of all units.

These include GIC, which is subscribing to more than 100 million units that make up 9.8 per cent of the total units in issue after the offering. Immediately after the listing, GIC will be a substantial unit holder – becoming the second-largest investor in NTT DC Reit after its sponsor.

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The other cornerstone investors are AM Squared, Ghisallo Master Fund, Hazelview Securities, Pinpoint Asset Management (Singapore), Viridian Asset Management and UBS (acting through its Singapore Branch, on behalf of wealth management customers).

Separate from the offering, sponsor NTT Ltd will subscribe to over 257 million units, representing 25 per cent of all units. 

The Singapore public offer opens at 9 pm on Monday, and closes at 12 pm on Thursday. The counter is expected to start trading at 2 pm on Jul 14.

Its forecast annualised distribution yield is 7.5 per cent for its 9M FY2025/2026 period (Jul 1, 2025 to Mar 31, 2026).

The IPO portfolio has an appraised value of around US$1.6 billion, with a design infrastructure technology load of about 90.7 megawatts (MW). All assets in the portfolio are freehold, except for the Singapore asset, which is on leasehold land expiring in 2070.

It comprises six carrier-neutral, Tier III or Tier III-equivalent assets with stringent operational and technical specifications that serve customers’ high-value workloads, said the manager.

The portfolio is diversified across Northern Virginia and Northern California in the US, Vienna in Austria and Singapore, with a mix of hyperscale and colocation customer contracts.

Northern Virginia is the largest data centre market in the world, while Northern California is ranked eighth in the US. At the same time, Vienna is a fast-growing data centre market in the European region, and Singapore is the second-largest market in the Asia-Pacific.

As at end-2024, the occupancy of the IPO portfolio stood at 94.3 per cent, with a weighted average lease expiry of 4.8 years.

Hyperscale customers, comprising global cloud service providers and major international tech giants, make up 51 per cent of the portfolio’s total monthly base rent as at Dec 31, 2024.

The IPO portfolio also enjoys built-in organic growth from contractual escalations, with nearly three-quarters of contracts with fixed escalations of 3.3 per cent on average.

The Reit manager said that there could also be potential earnings uplift from asset enhancement initiatives such as the implementation of improved cooling methods and the upgrading of integral mechanical, electrical and plumbing systems, which can help to improve operational efficiencies and lower operating costs.

In the near term, assets comprising approximately 130 MW of the sponsor group’s global data centre portfolio have been identified as high conviction potential acquisition targets for NTT DC Reit, for potential execution within the next five years.

If acquired, these assets could potentially allow NTT DC Reit to double its size and capacity to over 200 MW.

NTT DC Reit’s aggregate leverage at IPO stands at 35 per cent. Some 70 per cent of its borrowings are on fixed rates or hedged-to-fixed rates via interest rate instruments, and it has no debt maturities in the next three years.