Digital Core REIT 1Q26 Earnings Update: Strong 44% rental reversion supports 7.0% yield

• Digital Core REIT delivered stable revenue and distributable income, offsetting Linton Hall downtime through positive rental reversions, contributions from prior acquisitions, and prudent financing.

• It achieved strong +44% rental reversion in 1Q26, driven by lease renewals at Devin Shafron Drive in Northern Virginia.

• DCRU remains on track to meet its FY26 DPU target of USD 0.036, supported by a resilient first-quarter performance and strong rental reversion momentum.

• Medium-term growth catalysts, however, are limited, as most key leases have already been renewed and room for acquisitions remains constrained.

• The REIT trades at a steep 0.64x price-to-NAV. We maintain our target price of USD 0.69, implying ~35% upside and an average 8% dividend yield over the next three years.

Resilient performance with strong rental reversion

Digital Core REIT (SGX: DCRU) reported revenue and distributable income that were broadly flat year-on-year. The temporary loss of rental income from its Linton Hall facility was offset by positive rental reversions, contributions from acquisitions completed in late 2024 and 2025, and prudent financing.

Net Property Income fell 4.9% YoY, driven by a 4.6% increase in property expenses.

Table 1: 1Q26 financial highlights

	1Q26	1Q25	YoY Change
Revenue	44,132	44,225	-0.2%
Net Property Income	21,298	22,394	-4.9%
Distributable Income	11,672	11,687	-0.1%
Source: Digital Core REIT 1Q26 Presentation Deck Data as of 31 March 2026. Figures are in USD thousands except percentages

DCRU secured USD 3 million of new and renewal leases in 1Q26 at a strong +44% rental reversion. This was primarily driven by a lease renewal at its Devin Shafron Drive property in Northern Virginia—a key data centre hub where tight supply continues to support favourable leasing conditions.

Portfolio occupancy edged down slightly from 97.3% to 97.1%, due to a decline at the 200 North Nash Street facility in Los Angeles. Occupancy there fell from 83.5% to 81.4% following enterprise customer churn, partially offset by growth in connectivity customers. In contrast, occupancy at Digital Osaka 2 improved marginally from 98.3% to 98.4%, supported by local enterprise demand.

Importantly, occupancy at 200 North Nash Street remains above 80%, which management considers healthy for a colocation asset. Unlike single-tenant hyperscale data centres, colocation facilities house multiple customers with varying space and power needs, making full utilisation structurally more difficult to achieve.

Table 2: Portfolio summary

Source: Digital Core REIT 1Q26 Presentation Deck. Data as of 31 March 2026.

Aggregate leverage increased from 37.1% to 39.0%, driven by higher working capital requirements, capital expenditure for Linton Hall, and unit buybacks, but remains within management’s 35–40% target range and below the Monetary Authority of Singapore’s 50% regulatory limit. During the quarter, DCRU repurchased 7 million units at an average price below USD 0.49—representing a 39% discount to NAV—resulting in approximately 30 basis points of DPU accretion while increasing leverage by less than 20 basis points.

The proportion of fixed-rate debt declined from 85% to 80% but remains within the REIT’s target range. Management noted that a portion of the newly incurred debt is temporary in nature and therefore does not warrant hedging.

Limited growth catalysts, but valuation and dividend yield remain compelling

The refurbishment of Linton Hall remains on track and within budget, with completion and lease commencement expected in December 2026.

In the interim, we expect DPU to remain broadly stable at USD 0.036 for FY2026. The temporary income loss from Linton Hall is likely to be offset by several factors, including full-year contributions from the 20% stake in Osaka 3 (acquired in March 2025), higher rental income from the renewed lease at Devin Shafron Drive, and upcoming positive rental reversions at the 200 North Nash Street colocation facility. Management noted no observable impact on leasing demand despite rising electricity prices stemming from the US-Iran conflict and expects the majority of the facility’s ~30 customers to renew at higher rents. This underscores the strong structural demand for data centres to support AI-driven workloads in an environment of constrained supply.

We expect DPU to grow by high double digits in FY2027 as Linton Hall begins contributing rental income. However, beyond this step-up, medium-term growth is likely to be more subdued. With less than 10% of the portfolio’s leases expiring annually through 2029, scope for rental growth from lease renewals is limited. Management also expects upcoming rental reversions to moderate from the strong 44% level seen in 1Q26.

The REIT’s weighed average lease expiry (WALE) now stands at 5.3 years on a pro forma basis, including Linton Hall. While this provides strong income visibility, it also caps the potential for near-term growth.  

Figure 1: Majority of leases expire after 2029

Management has articulated an ambition to double its asset base to USD 4 billion over the next three to five years, partly through capital recycling from North America into Asia-Pacific markets such as Singapore and Japan. However, with leverage already nearing the upper end of its target range of 35-40%, future acquisitions will likely require equity funding.

Given that DCRU units currently trade at a steep discount to NAV, equity-funded expansion appears unlikely in the near term, as issuing new units at depressed prices would dilute existing unitholders and reduce acquisition accretion. As such, we do not expect a meaningful uplift in DPU beyond FY2027 at this stage.

Nonetheless, DCRU trades at an attractive valuation of 0.64x price-to-NAV, alongside a FY2026 forward dividend yield of approximately 7.0%. We maintain our price target of USD 0.69, implying 34.8% upside through end-2028, with an average dividend yield of around 8.0% over the next three years.

We reiterate our Buy recommendation, supported by compelling valuations and income yield, despite the lack of medium-term growth catalysts beyond Linton Hall.

To learn more about the investment case for Digital Core REIT, please read this article.

Table 3: DCRU projections

DCRU	FY25A	FY26E	FY27E	FY28E
EPS (in USD)	0.037	0.034	0.039	0.040
P/E Ratio (X)	13.93	15.28	13.21	12.80
DPU (in USD)	0.036	0.036	0.043	0.045
DPU growth (%)	0.0%	-0.3%	18.9%	4.2%
Dividend Yield (%)	7.0%	7.0%	8.3%	8.6%
Current Price	USD 0.52
Target Price	USD 0.69
Upside Potential	34.8%
Source: Historical data is from Bloomberg Finance L.P., while forecasted data are based on iFAST Estimates. Computation of data used DCRU’s closing price as of 5 May 2026.

Figure 2: DCRU’s share price vs DPU

iFAST Research rating system

iFAST Research employs a five-tier rating system for stocks: Buy (material upside potential, favourable risk-return); Accumulate (moderate upside, selectively add on weakness); Hold (limited upside, maintain existing positions); Trim (upside insufficient to justify a full position, reduce exposure on strength); and Sell (material downside risk, exit position).

Declaration:

For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold a NIL position in the abovementioned securities.

This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report – including all investment theses, ratings, price targets and conclusions – has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.

This research report is produced under the Grant for Equity Market Singapore (“GEMS”) Scheme. iFAST Financial Pte Ltd receives financial compensation for the preparation and publication of this report. For more information regarding the GEMS scheme and its objectives, please refer to this infographic. iFAST Financial Pte Ltd maintains editorial independence regarding the analysis and conclusions presented herein.