NTT DC REIT

[weijian]

It is probably going to be a matter of time before Tesla merges with SpaceX/xAI. With accelerated technological improvements (which means accelerated obsoletion as well) and huge investment into supply, this 2 tailwinds will probably change into headwinds for all data center REITs in the future.

Are u referring to Tesla/SpaceX merger tailwinds from Flying Roadster and Starmind? (video in next post due to VB video quota per post)

Hi swakoo,

Thanks for sharing the videos on Flying Roadster and Starmind, as I had just read about them on the news but the videos actually got into the specifics of "how to make them happen".

And let me clarify my previous post - The "2 tailwinds" I was referring to are  "technological improvements" and "huge investment into supply". As for a potential Tesla-SpaceX merger, I suspect that the merger may be a catalyst that converts the tailwinds into headwinds. This is because if the oversupply materializes in future, there is a good chance that Tesla will have to lease data centers from SpaceX (xAI). It will be a no brainer if both are now under the same parent corporate entity. If Tesla runs down its current DC leases with NTT DC REIT and does not extend, then this tenant concentration risk becomes reality.

[swakoo]

And let me clarify my previous post - The "2 tailwinds" I was referring to are  "technological improvements" and "huge investment into supply". As for a potential Tesla-SpaceX merger, I suspect that the merger may be a catalyst that converts the tailwinds into headwinds. This is because if the oversupply materializes in future, there is a good chance that Tesla will have to lease data centers from SpaceX (xAI). It will be a no brainer if both are now under the same parent corporate entity. If Tesla runs down its current DC leases with NTT DC REIT and does not extend, then this tenant concentration risk becomes reality.

Hi weijian,

Thanks for clarifying. Yes xAI has massive terrestrial DCs. So I do share your thinking on the top tenant concentration risk if there is a merger.

Think if there is a merger, there is also a political risk related to the SpaceX rocket/satellite biz side, which relies a lot on US gov contracts and regulatory decisions. Depending on outcome of US mid-terms and 2028 elections. As the health of the top tenant may depend also on the health of the then overall merged entity.

[weijian]

Think if there is a merger, there is also a political risk related to the SpaceX rocket/satellite biz side, which relies a lot on US gov contracts and regulatory decisions. Depending on outcome of US mid-terms and 2028 elections. As the health of the top tenant may depend also on the health of the then overall merged entity.

Hi swakoo,

I am generally skeptical that election results are "significant" risk factors to US corporates. I do not deny that certain regulatory changes will affect business economics, eg. As much as Elon is close to Trump, the oil majors still had their way with EV subsidies removed. Therefore, regulatory capture can also be an upside too and so I suppose over the longer term, you win some and you lose some. For US corporates, they should be used to color changes at the White House.

Till now, I am in no doubt on the financial health of Tesla as I mentioned earlier: https://www.valuebuddies.com/thread-1170...#pid173306

[swakoo]

I am generally skeptical that election results are "significant" risk factors to US corporates. I do not deny that certain regulatory changes will affect business economics, eg. As much as Elon is close to Trump, the oil majors still had their way with EV subsidies removed. Therefore, regulatory capture can also be an upside too and so I suppose over the longer term, you win some and you lose some. For US corporates, they should be used to color changes at the White House.

Hi weijian,

Then why do you think Musk has just donated a whopping USD276 mil to the Republicans for the upcoming mid-terms?

[weijian]

I am generally skeptical that election results are "significant" risk factors to US corporates. I do not deny that certain regulatory changes will affect business economics, eg. As much as Elon is close to Trump, the oil majors still had their way with EV subsidies removed. Therefore, regulatory capture can also be an upside too and so I suppose over the longer term, you win some and you lose some. For US corporates, they should be used to color changes at the White House.

Hi weijian,

Then why do you think Musk has just donated a whopping USD276 mil to the Republicans for the upcoming mid-terms?

hi swakoo,

I am not part of Musk's inner circle/mind and so not privy to that. But let's try to put 276mil into context - Elon is worth ~900bil right now and 276mil translates to just ~0.03% of his networth. The average Spore adult wealth in 2025 is ~680k sgd and 0.03% translates to ~208sgd. This "average" Spore adult can purposefully or frivolously use 200bucks, but I don't think I will read too much into that. 

P.S. let's stop further discussion on this as it is getting out of topic and we should be keeping politics out as well.

[swakoo]

Hi weijian,

Then why do you think Musk has just donated a whopping USD276 mil to the Republicans for the upcoming mid-terms?

hi swakoo,

I am not part of Musk's inner circle/mind and so not privy to that. But let's try to put 276mil into context - Elon is worth ~900bil right now and 276mil translates to just ~0.03% of his networth. The average Spore adult wealth in 2025 is ~680k sgd and 0.03% translates to ~208sgd. This "average" Spore adult can purposefully or frivolously use 200bucks, but I don't think I will read too much into that. 

P.S. let's stop further discussion on this as it is getting out of topic and we should be keeping politics out as well.

Hi weijian, my question was not targeted from a political or ideological perspective, and arguably may have other aspects that are not exactly OOT. Out of respect to the excellent job you are doing as moderator, I will stop here.

[swakoo]

Ok Moderator has kindly asked me to continue if I think it may not be OOT, so here goes.

First, an extract from Gemini: Musk's $276 Million Republican Donation

2. Protecting Business Interests and Curbing Regulations

Musk runs several companies—including Tesla, SpaceX, and X—that intersect heavily with federal policy, government contracts, subsidies, and aggressive regulatory oversight. Analysts note that heavily funding the GOP helps shield his business ecosystem from:

Government Investigations and Scrutiny:

Democratic lawmakers have frequently called for investigations into federal contracts awarded to SpaceX and regulatory policies affecting Tesla. Maintaining a friendly Congress helps mitigate the risk of hostile congressional oversight or legislative crackdowns. 

Favorable Policy Environments:

Regulatory friction (such as environmental rules, labor standards, and automated vehicle safety guidelines) directly impacts his companies' bottom lines. Republican majorities are generally more aligned with Musk's push for deregulation. 

Part of the reason for his massive donation could possibly be ideological. But there is also a lot of potential financial impact on his businesses - Tesla (suspected top tenant of NTT DC reit) and SpaceX (merger with Tesla floated just hours ago) - in terms of regulatory policies and contracts. With his outsized donations at both 2024 and 2026 elections, and DOGE activities, his businesses are a BIG target for the Dems if they control 1 or both chambers of Congress. 

The donation is loose change for a trillionaire but can mitigate a big financial hit to his businesses. Which may then possibly impact the top tenant of NTT DC reit.

[CY09]

Thanks Swakoo for explaining. If the Republicans remain in power in a tightly contested US political climate, holding 2 out of the 3 executive bodies, Tesla will likely continue its way.

On the merger, I foresee SpaceX and Tesla ending up merged; Musk’s political donations and lobbying, a standard part of the US process, should help it clear major federal agency hurdles.

Flowing down to NTT DC REIT, I am sanguine that Tesla will remain the largest tenant, given how important a merged SpaceX/Tesla entity will become and how Musk’s alignment with the Republicans makes him a dominant force. Money’s influence on US politics is a concern, but as investors, we have to accept it. The enlarged entity despite putting data centres into space will likely need its current data centre capacity to do whatever smart AI things it wants to build.

Hence, why I am not particulary concerned about Tesla being the large concentrated tenant. Unlike other Singapore REITs, NTT DC REIT has been signalling its more OPMI friendly to the extent they are accepting any issued unit to the manager at NAV price or market price that is above (NAV). This is a very significant signal

And the only REIT who has done it

[swakoo]

On the merger, I foresee SpaceX and Tesla ending up merged; Musk’s political donations and lobbying, a standard part of the US process, should help it clear major federal agency hurdles.

Hi CY09,

As SpaceX's xAI owns a lot of terrestrial DCs, think it is actually more risky for NTT DC reit unitholders if there is a merger. The good news is that there are significant hurdles to a merger:

Musk’s public endorsement of SpaceX-Tesla deal may throw a wrench in talks

Musk Tries to Lock In His Tesla-SpaceX Dream Before Trump’s Exit (gift article, link valid for 7 days)

Unlike other Singapore REITs, NTT DC REIT has been signalling its more OPMI friendly to the extent they are accepting any issued unit to the manager at NAV price or market price that is above (NAV). This is a very significant signal

Yes, as mentioned earlier, they should be applauded for the 2 very  progressive moves.

Hence, why I am not particulary concerned about Tesla being the large concentrated tenant.

Ok, think this is debatable. IIRC they have mentioned they are trying dilute the concentration through the acquisition of other DCs.

[weijian]

kopi-C with CFO of NTT DC REIT: The investor who crossed to the other side of the table

He breaks it down: the REIT owns the buildings and provides the cooling, power and security. It then leases contracted power capacity to its tenants. Rent is charged on that contracted capacity, rather than on how much a tenant actually uses. This gives the REIT contracted rental income from that capacity, with the REIT currently distributing 100% of its distributable income.

Given this context, it is hard to avoid comparisons to the much discussed hyperscalers (the likes of Microsoft, Google and Amazon). But Ozaki sees them as partners rather than rivals. Because their own requirements are so large that they cannot build everything themselves, they lease from third-party operators such as NTT.

Yet the thread Ozaki keeps returning to is the apparent gap between what the REIT has delivered and how the market has valued it. The portfolio is close to fully occupied—in the mid-to-high 90s—and recorded a 13.4% rental reversion in its latest business update for 1Q FY26/27.  These, he says, point to the strength of the REIT’s operating performance. And he is also mindful that their projected yield, set at 7.5% at listing and now closer to 8%, is one some investors read as a warning about asset quality. This is a reading he firmly disputes.  Ozaki believes that the elevated yield reflects unfamiliarity: two-thirds of the portfolio sits in markets—Sacramento and Vienna among them—that Singapore investors are unfamiliar with. Furthermore, the REIT has only a few quarters of listed track record behind it.

What keeps him up at night, he says, is less of any single shock than the interest-rate environment and the speed at which data-centre demand evolves, which can leave assets obsolete. The right response, in his view, is to keep acquiring newer, future-proofed assets from the Sponsor and, potentially swap older ones back. His closing message to investors is one that he repeats consistently. “Look at our track record,” Ozaki says—the occupancy remains high, the reversions are solid, and the steps taken to address investors’ feedback—rather than the headline anxieties about an AI bubble or an unfamiliar market.

https://www.sgx.com/research-education/m...other-side