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Is this why Digital Core REIT's unit price has been weak?

Goola Warden
Goola Warden3/16/2023 03:33 PM GMT+08  • 2 min read
Is this why Digital Core REIT's unit price has been weak?
DBS Research says Cyxtera's refinancing woes caused DC REIT's price to fall as it contributes 22.6% to its GRI
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There has been some weakness in the price of Digital Core REIT (DC REIT) DCRU %

this week. According to DBS Group Research, Cyxtera Technologies is one of DC REIT’s top 10 tenants accounting for 22.6% of gross rental income. Cyxtera Technologies is a data centre owner and operator in the US, and Asia-Pacific.

Last month, Bloomberg reported that Cyxtera is attempting to refinance a revolving credit facility that matures in November this year. “Fresh concerns on Cyxtera’s ability to service their debt obligations have surfaced, and most recently, Moody’s downgraded the company’s corporate family rating from B3 to Caa2. Moody’s cited that although they believed in Cyxtera’s underlying business fundamentals, they are concerned with the firm’s ability to service debt obligations in the medium term,” the DBS report says.

“We understand that although energy prices have came off the peak and have stabilised, the high interest rate environment calls into question Cyxtera’s ability to continue expanding and growing, which has been once of the key drivers of its business strategy,” DBS says.

To date, Cyxtera is current in its rent, DBS reports. “Based on our estimates, Cyxtera is DC REIT’s second largest tenant, accounting for 22.6% of DCREIT’s revenues. Although this may seem like a concern for DCREIT, we take comfort from its Sponsor’s commitment to the REIT. Similar to what we saw with SunGard previously, DCREIT’s Sponsor was quick to step in and provide support for the REIT.”

A spokeswoman for DC REIT's manager says that its tenants are current with their rent with no aged receivables. She adds that DC REIT has no banking or customer relationship with Silicon Valley Bank, Signature Bank and Silvergate Bank. "None of our tenants are tech start-ups or venture capital companies. Our customers are all publicly traded companies," the spokeswoman says.

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