NTT DC REIT IPO at projected 7.5% yield. Is it worth applying?

What happened?

Singapore’s largest REIT IPO in a decade is here. 

NTT Data Center REIT (NTT DC REIT) is seeking an IPO on the Singapore Exchange (SGX) to raise S$998m. 

Upon listing, NTT Data Center REIT will be the third pure-play data centre REIT on the SGX.

Investors in Singapore looking for passive income might be familiar with data centre REITs, and we have previously shared our thoughts on Keppel DC REIT and Digital Core REIT.

However, I have still seen several questions in the Beansprout community asking if it might be worthwhile considering the NTT DC REIT IPO.

Let’s dive deeper to understand more about NTT DC REIT, including its portfolio, risks and projected dividends. 

What you need to know about NTT DC REIT IPO

NTT DC REIT’s initial portfolio comprises six operational data centres across the United States, Austria, and Singapore. The assets are appraised at a combined value of US$1.57 billion.

The REIT is sponsored by NTT Limited, part of the NTT Group, one of Japan’s largest telecommunications companies and a top global data centre operator.

The offering will consist of 599.89 million units, priced at US$1 (S$1.276) per unit. This includes 569.89 million units placed with institutional and overseas investors, and 30 million units publicly offered in Singapore.

NTT Limited will retain a 25% stake in the REIT and remain the largest shareholder post-listing.

GIC Private Limited is set to take up 100.88 million units, making it the second-largest unitholder with a 9.8% stake.

Other cornerstone investors include AM Squared Limited, Hazelview Securities, Pinpoint Asset Management, Viridian Asset Management, and UBS Group (for its wealth management clients).

#1 - Portfolio of six assets worth US$1.6 billion

NTT Data Centre REIT is expected to list with a portfolio of six operational data centre assets valued at approximately US$1.6 billion. 

The portfolio comprises four assets located in the United States, one in Vienna, and one in Singapore, offering investors exposure to established data infrastructure markets across North America, Europe and Asia.

The assets have an average occupancy rate of 94.3% and a weighted average lease expiry (WALE) of 4.8 years.

The tenant base is diversified between co-location customers (49%) and hyperscale users (51%). 

Co-location tenants generally pay higher rents and have rent escalation clauses in their leases, potentially offering a source of rental growth. 

Hyperscale tenants, typically large technology or cloud service providers, offer long-term stability but may come with lower headline rental rates due to their scale.

#2 - Well staggered lease expiry profile

NTT DC REIT has structured its lease expiry profile to ensure that no more than 20% of leases are due for renewal in any single financial year. 

Over the past three years, the REIT has maintained a high average tenant retention rate of 98.3%.

There is scope for organic growth in NTT DC REIT’s portfolio through built-in rental escalations across its portfolio. Approximately 74.6% of its lease contracts include an average annual rent escalation of 3.3%, while 3.0% are linked to the Consumer Price Index (CPI). 

#3 - Revenue forecasted to grow

NTT DC REIT forecast revenue to grow by 5.2% from 9M25/26 (forecast year from 1 July 2025 to 31 March 2026) to US$234.8 million in FY26/27 (projection year from 1 April 2026 to 31 March 2027). 

This is partly driven by an expected increase in the portfolio occupancy rate to 97.6% in 9M25/26 and 97.7% in FY26/27 from 94.3% as at 31 December 2024. 

The global data centre market has experienced sustained demand growth, supported by the increased adoption of cloud computing, artificial intelligence, and ongoing digital transformation. 

Between 2018 and 2024, annual data centre capacity expanded at a compound annual growth rate (CAGR) of 37.4%. 

Despite this capacity growth, global vacancy rates remain low at approximately 3.2%, indicating continued tight supply-demand dynamics in the sector.

#4 - Backed by a strong sponsor

NTT DC REIT is supported by NTT Limited, a well-established global data centre operator with a total portfolio capacity of over 2,200 MW. 

This includes 1,419 MW of operational capacity and 858 MW currently under construction across Asia, EMEA, and the Americas. 

Source: NTT DC REIT Prospectus

In terms of total capacity, NTT Limited ranks as the world’s third-largest data centre provider.

Source: NTT DC REIT Prospectus

#5 - Strong acquisition pipeline

NTT DC REIT has a right of first refusal (ROFR) agreement with its Sponsor, which provides access to a potential pipeline of approximately 2,000 MW of IT capacity. 

Of this, around 130 MW has been identified for possible near-term acquisitions. This could increase NTT DC REIT’s capacity from 90 MW at listing to up to 200 MW over time.

#6 - Ample debt headroom to fund acquisitions

NTT DC REIT is expected to have a leverage ratio of approximately 35% upon listing. 

This level of gearing provides an estimated debt headroom of around $450 million before reaching the MAS regulatory cap of 50% for S-REITs, allowing capacity to fund future acquisitions. 

Additionally, the REIT has no debt maturing in the next three years and has included flexibility in its debt structure through two one-year extension options.

#7 - Projected distribution yield of 7.5% for forecast year 9M25/26

Based on the forecast annualised distribution per unit of US 7.50 cents for forecast year 9M25/26 and offering price of US$1.00, NTT DC REIT is forecasted to offer an annualised distribution yield of 7.5%.

Key risks for NTT DC REIT

#1 - Significant exposure to one automotive company (likely Tesla)

NTT DC REIT faces tenant concentration risk, as its top 10 customers collectively contribute 62.6% of total rental income. 

Notably, its single largest tenant, a Fortune 100 U.S. automotive company, accounts for 31.5% of total rent. 

This automotive company which has a credit rating of ‘BBB’ by S&P and ‘Baa3’ by Moody’s is likely to be Tesla, in our view.

Hence, any adverse developments or negative news relating to Tesla may weigh on sentiment towards NTT DC REIT, given its significant revenue exposure to a single tenant. 

#2 - Future yield might be impacted by capex requirements

NTT DC REIT intends to pay out 100% of its distributable income to unitholders, which supports a higher initial dividend yield. 

However, the REIT has not set aside a capital expenditure (capex) reserve at this stage. 

While this benefits current distributions, future yields may be affected if the manager decides to allocate a portion of income for capex in subsequent periods.

That said, the initial portfolio has recently undergone major capex upgrades, which may reduce the near-term need for further capital reserves.

#3 – Payment of REIT management fees in units rather than in cash 

For Forecast Year 9M25/26 and Projection Year FY26/27, it has been assumed that the NTT DC REIT manager will receive 100% of the Base Fee and 100% of the Performance Fee in units, rather than in cash.

This may lead to potential dilution for unitholders, as more units are issued. 

What would Beansprout do? 

NTT DC REIT offers exposure to the fast-growing data centre sector, with its initial portfolio spanning six assets across the US, Austria, and Singapore. 

Backed by a strong sponsor in NTT Limited, the REIT has room to grow through a right-of-first-refusal over a substantial pipeline of potential assets. 

There is also income visibility from its well-staggered lease expiry profile and built-in rental escalations. 

However, there are several risks worth looking out for.

The largest tenant contributes over 30% of rental income, creating some concentration risk. 

While projected distributions are enhanced by a 100% payout ratio and no capex reserve, future yields may be affected if the manager decides to allocate a portion of income for capex. 

Also, the payment of management fees in units rather than in cash may lead to potential dilution for unitholders. 

We would compare the valuation of NTT DC REIT to Digital Core REIT and Keppel DC REIT, which are the two other pure-play data centre REITs listed on the SGX. 

Digital Core REIT would be its closest peer, given the geographical split of its portfolio predominantly in the US, as well as market capitalisation.

NTT DC REIT’s projected distribution yield of 7.5% for forecast year 9M25/26 is above the dividend yield of Keppel DC REIT at 4.3%, and the dividend yield of Digital Core REIT at 6.9%. 

However, I would be mindful about the sustainability of NTT DC REIT’s dividend yield based on the risks shared earlier. 

Hence, I would less keen to subscribe to the NTT DC REIT IPO at this time. 

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How to apply for NTT DC REIT IPO?

Applications for NTT DC REIT Singapore Public Offer units opened at 9 pm on 7 Jul 2025, and will close at 12 pm on 10 July 2025. 

NTT DC REIT is expected to commence trading on the SGX Mainboard at 2 pm on 14 July 2025. 

Applications for the Singapore Public Offer Units can be made through: 

• ATMs and internet banking websites of DBS (including POSB), OCBC, and UOB
• Mobile banking app of DBS and UOB
• Printed WHITE Public Offer Units Application Form in the Prospectus

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