Data center operator woes hit Singapore listing ambitions

Singapore is flourishing as an Asian financial centre. Record amounts of capital are flowing into the city-state from China, South-East Asia, the US and elsewhere. Not only has Singapore benefited from the closure of rival Hong Kong during the pandemic, but the country has benefited from a more neutral outlook in a world marked by geopolitical polarization.

But it is struggling with its ambitions for a key part of its finance hub strategy – to develop a thriving stock market with a pipeline of new equity listings. Monthly delistings often outnumber new companies and the number of quoted companies has fallen from 720 in early 2020 to 645 by April. The Straits Times Index for the market has been essentially flat over the past five years, not including the Covid-related decline and recovery.

And the disappointing performance of the high-profile listing of an overseas business, Digital Core REIT, has dealt a fresh blow to the market. It is not just a matter of huge fall in share price. The circumstances of the real estate investment trust’s problems call into question the level of disclosure required on the market.

The exit from US property group Digital Realty, which owns data centers in the US, Toronto and Frankfurt, was Singapore’s largest equity listing by the amount of money raised in the past five years and the most in a decade, according to Dealogic. Was the fourth largest list. The company’s shares have fallen 35 per cent from the offer price and 60 per cent from the early 2022 high.

A major factor in that slide has been problems with two major tenants. Earlier this month, data center operator Sixtera, which was reported to be the second largest client of Digital Core REIT, filed for bankruptcy. The company’s share in the trust’s rental revenue income is around 22 per cent.

Sixtera’s troubles have been documented by the media since at least the beginning of this year. But until recently investors wouldn’t have known about them just by reading the disclosures made by Digital Core REIT, or even that it was a huge client of the trust. According to the management, the Singapore-listed conglomerate is generally bound by confidentiality provisions in the lease agreement.

Nor was the identity of Sungard, the trust’s fifth largest customer, disclosed at the time of the IPO. Sungard filed for bankruptcy a second time in April 2022 — just four months after Digital Core REIT’s IPO. The trust informed investors of the bankruptcy of its fifth-largest tenant, 10 days after SunGard filed in the US. It did not mention Sungard, whose name accounts for about 7 percent of the trust’s rental revenue.

It was not until April that there was any mention of the troubles Scyxtera would face when the trust was released. answer For shareholder questions. Cyxtera filed for bankruptcy protection two months later on June 4. This time the failure was disclosed the next day, although Cyxtera was still not mentioned by name.

under singapore continuous disclosure rule, companies have to disclose information that is likely to materially affect the price or value of their securities. The exception is if the information is confidential, prepared for internal management purposes or relates to incomplete negotiations. The Singapore Exchange says: “We are assessing the information flow and the readiness of the disclosure, taking into account the impact on the REIT’s financial position.”

Mac Yuen Tin, a professor at the National University of Singapore, says that if Digital Core REIT were to be listed in the US, some of its “slow disclosure” could see investors “following them”.

A Digital Core REIT spokesperson said: “Upon learning that its second largest client had filed for bankruptcy, Digital Core REIT immediately requested a trading halt and promptly provided robust and timely disclosures. .. In general, we believe that it is inappropriate to speculate or comment about the financial condition or actions of any customer.” The company previously told shareholders it expected “minimal impact” from the bankruptcy.

But the poor performance of Digital Core REIT’s share price speaks to low confidence in the company’s prospects and the assets it has chosen for its portfolio. In seeking to attract more listings, it seems fair to ask: Did Singapore get a bad deal with Digital Core REIT? The city-state has developed as a hub for REITs, but as a center for stock exchange listings, it has not matched its commercial achievements elsewhere. The Digital Core REIT’s woes underscore the importance of quality in listing candidates and stronger regulation to ensure the integrity of the market if it wants to do well.

mercedes.ruehl@ft.com

Singapore is flourishing as an Asian financial centre. Record amounts of capital are flowing into the city-state from China, South-East Asia, the US and elsewhere. Not only has Singapore benefited from the closure of rival Hong Kong during the pandemic, but the country has benefited from a more neutral outlook in a world marked by geopolitical polarization.

But it is struggling with its ambitions for a key part of its finance hub strategy – to develop a thriving stock market with a pipeline of new equity listings. Monthly delistings often outnumber new companies and the number of quoted companies has fallen from 720 in early 2020 to 645 by April. The Straits Times Index for the market has been essentially flat over the past five years, not including the Covid-related decline and recovery.

And the disappointing performance of the high-profile listing of an overseas business, Digital Core REIT, has dealt a fresh blow to the market. It is not just a matter of huge fall in share price. The circumstances of the real estate investment trust’s problems call into question the level of disclosure required on the market.

The exit from US property group Digital Realty, which owns data centers in the US, Toronto and Frankfurt, was Singapore’s largest equity listing by the amount of money raised in the past five years and the most in a decade, according to Dealogic. Was the fourth largest list. The company’s shares have fallen 35 per cent from the offer price and 60 per cent from the early 2022 high.

A major factor in that slide has been problems with two major tenants. Earlier this month, data center operator Sixtera, which was reported to be the second largest client of Digital Core REIT, filed for bankruptcy. The company’s share in the trust’s rental revenue income is around 22 per cent.

Sixtera’s troubles have been documented by the media since at least the beginning of this year. But until recently investors wouldn’t have known about them just by reading the disclosures made by Digital Core REIT, or even that it was a huge client of the trust. According to the management, the Singapore-listed conglomerate is generally bound by confidentiality provisions in the lease agreement.

Nor was the identity of Sungard, the trust’s fifth largest customer, disclosed at the time of the IPO. Sungard filed for bankruptcy a second time in April 2022 — just four months after Digital Core REIT’s IPO. The trust informed investors of the bankruptcy of its fifth-largest tenant, 10 days after SunGard filed in the US. It did not mention Sungard, whose name accounts for about 7 percent of the trust’s rental revenue.

It was not until April that there was any mention of the troubles Scyxtera would face when the trust was released. answer For shareholder questions. Cyxtera filed for bankruptcy protection two months later on June 4. This time the failure was disclosed the next day, although Cyxtera was still not mentioned by name.

under singapore continuous disclosure rule, companies have to disclose information that is likely to materially affect the price or value of their securities. The exception is if the information is confidential, prepared for internal management purposes or relates to incomplete negotiations. The Singapore Exchange says: “We are assessing the information flow and the readiness of the disclosure, taking into account the impact on the REIT’s financial position.”

Mac Yuen Tin, a professor at the National University of Singapore, says that if Digital Core REIT were to be listed in the US, some of its “slow disclosure” could see investors “following them”.

A Digital Core REIT spokesperson said: “Upon learning that its second largest client had filed for bankruptcy, Digital Core REIT immediately requested a trading halt and promptly provided robust and timely disclosures. .. In general, we believe that it is inappropriate to speculate or comment about the financial condition or actions of any customer.” The company previously told shareholders it expected “minimal impact” from the bankruptcy.

But the poor performance of Digital Core REIT’s share price speaks to low confidence in the company’s prospects and the assets it has chosen for its portfolio. In seeking to attract more listings, it seems fair to ask: Did Singapore get a bad deal with Digital Core REIT? The city-state has developed as a hub for REITs, but as a center for stock exchange listings, it has not matched its commercial achievements elsewhere. The Digital Core REIT’s woes underscore the importance of quality in listing candidates and stronger regulation to ensure the integrity of the market if it wants to do well.

mercedes.ruehl@ft.com