NTT Data Centre REIT 7.5% Distribution Yield Sustainable Or Just A Dividend Trap?

I thought that it is quite interesting that folks on social media are having many different interpretations of the financials of NTT Data Centre REIT ("NTT REIT") and with some asserting that the NTA of this REIT will keeping dropping as it is making losses and paying out dividends from its capital. Others voiced similar concerns as me with regard to the high cocentration risk of over 30% in one single customer (suspected to be Tesla) as well as the ever weakening USD. Today we will delve deeper into the financial statements of NTT REIT to make sense of the sustainability of the high dividend yield committed by its management. From there, we will be better able to guage on the degree of margin of safety required- based on one's personal risk appetite- to start buying into NTT REIT. As at August 2, 2025, NTT REIT maekt price has dropped by <6%> from its IPO debuted price of S$1.00 per unit to S$0.94 per unit.

1. Financials Deep Dive.

First and foremost, let's address the elephant in the room. Is the financial performance signalling red-flag even before we consider the myriads of other business risks embedded in NTT REIT? For the latest year ending 31 March 2024 in the prospectus, NTT REIT is incurring a massive net loss of US$<30.8Mil>. The main reason for this reason seems to be a sudden spike in "Other Property Expenses" from US$5.8Mil in March 2023 to US$28.1Mil in March 2024. The strange part is that revenue has plummented by <21%> downwards from S$186Mil to S$146Mil despite the huge increase in "Other Property Expenses". 

2024 and 2023 Historical Profit and Loss

So is this only a one-off non-recurring loss for 2024 but in future, it will rise up from the ash? To answer this, we will need to go to take a look at the forecast provided:

Forecast FY2026 and FY2027

Well, the losses did go down from the mammoth <US$31Mil> to only <US$5.2Mil> and <US$4.9Mil> for  the forecasted FY2026 and FY2027 respectively but nevertheless, the forecasted results are not pretty and NTT REIT is apparently still in the red. This is shocking indeed as NTT REIT seems to be behaving like a Business Trust rather than a REIT. It is paying out distributions from capital and depleting its own net tangible asset over time.  

2.Revaluation of Investment Properties in The Financial Statements 

If you look at the forecast or historical financials, one will be able to see the substantial fair value revaluation for the data centres by NTT REIT. As the fair valuation accounting is subject to market conditions and I really wonder how someone can simply just forecast the future valuation for the next 2 years, we should just ignore this line item (highlighted in pink in above screenshot). Focus shall thus be on the recurring items which illustrates the routine operational Profit and Loss. So do not be misled by the abstract fair valuation which is just a non-cash item even if it looks fantastic.

Parting Thoughts-personal 

Originally, I thought that if NTT REIT corrected by 10%-20%, it may prove to be a good entry point. But based on its financial forecast for the next 2 years, its dismal financial performance will mean that NTT REIT NTA will still see losses at least for 2 more years and paying out distribution using capital. Unless there are clearer visibility on such enigmatic operating model for the data centres it manages, it maybe best to wait for the actual financial results post-IPO before accumulating some units.