DigiCo Infrastructure REIT (ASX: DGT) shares rose by 2% to $5.10 during their first two hours of trading on Friday.
The last major initial public offering (IPO) of 2024, DigiCo Infrastructure real estate investment trust (REIT) began trading at 12pm on a conditional and deferred settlement basis.
The ASX REIT opened at $4.98 per share, down 0.4% from its IPO price of $5, before moving up to $5.10. DigiCo shares are currently steady at $5 per share at the time of writing.
DigiCo is a data centre-focused REIT with an initial portfolio of 13 properties that it will own, operate, and develop in tier one and tier two locations across Australia and North America.
Data centres are hot property in today's growing digital economy. Rising demand for artificial intelligence (AI) is already a major tailwind for this property market segment.
The prospectus had told investors to expect 12 properties at first, with settlement on the prime Global Switch property in Sydney's CBD not expected before the IPO offer's completion on 18 December.
But DigiCo announced today that it has received the necessary approvals. The deal should be settled with another nine properties by 18 December.
DigiCo already owns three properties, so the starting portfolio will be comprised of 13 assets.
According to the prospectus, DigiCo REIT is expected to undergo significant growth, driven by the rapid increase in data creation and consumption worldwide.
The prospectus says:
The asset class is underpinned by structural tailwinds including increasing growth in data creation
and consumption, digitalisation of businesses, growing reliance on the cloud, adoption of next
generation technologies including artificial intelligence, the acceleration of the technology sector
globally and increased outsourcing of data centre services to specialised operators.
DigiCo REIT will aim for "strong income and capital growth" with "stable and growing distributions".
How did DigiCo REIT's IPO go?
The DigiCo REIT raised $1,995 million pursuant to the offer under its replacement prospectus.
The proceeds will be used to fund the initial portfolio of properties, including repaying loans from DigiCo's asset and investment manager, HMC Capital Ltd (ASX: HMC).
The offer proceeds will also provide working capital and balance sheet capacity to fund developments.
DigiCo REIT's starting assets
DigiCo already owns three properties in the United States, which are all greenfield development projects.
LAX1 and LAX2 are in Los Angeles, and CHI1 is in Chicago. CHI1 is a fully contracted development currently under construction and due to commence operations on 1 July 2025.
Among the 10 to be settled by 18 December, two are in the US in Dallas and Kansas City. Another four are in Brisbane, two are in Adelaide, one is in Townsville, and one is in Sydney.
Nine of the 10 properties are fully completed and operating data centres. One of the Brisbane properties is under construction and is due for completion in CY27.
The 13 properties will have 44MW of installed IT capacity and 193MW of future expansion IT capacity. They have a contracted IT capacity of 67MW and a contracted utilisation rate of 79%.
FIRB approval granted for major Sydney CBD acquisition
DigiCo REIT announced today that it had received Foreign Investment Review Board (FIRB) approval for the acquisition of Global Switch Australia, which is a data centre in Sydney's CBD.
Given the size and importance of the acquisition, this news likely contributed to a 2% rise in the DigiCo REIT share price shortly after the stock began trading.
Global Switch is by far DigiCo's largest acquisition at a cost of $1,936 million.
In revenue terms, the property will deliver 72.5% of DigiCo's forecast revenue (excluding interest income) for the period 18 December to 30 June 2025.
What are the starting numbers for DigiCo REIT?
The 13 properties will cost $3,956 million in total.
DigiCo REIT will have $1,945 million in borrowings and $452 million in cash and cash equivalents. Its target gearing range is 35% to 45%. Including Global Switch, DigiCo REIT's gearing is now 35.1%.
DigiCo expects to deliver a pro forma annualised FY25 adjusted EBITDA of $97 million.
What is HMC Capital?
HMC Capital is an ASX-listed alternative asset manager with $16 billion of assets under management across its five key strategies.
Those strategies are digital infrastructure, real asset, private equity, private credit, and energy transition.
Joseph Carrozzi AM, Independent Non-Executive Chair of HMC Digital Infrastructure, said DigiCo would benefit from the megatrends underpinning long-term demand for data centres.
He said:
Digitalisation is driving the rapid increase in demand for external data storage and processing solutions worldwide.
In addition, generative AI (GenAI) is experiencing exponential growth, driving demand for compute requirements. This demand uplift has occurred swiftly over recent years and generally has outpaced supply, leading to increased investment into the sector.
What about dividends?
The forecast annualised distribution yield is 4% for the period from 18 December to 30 June 2025.
DigiCo REIT intends to determine distributions semi-annually.
The first distribution will be a pro-rata amount based on the period between 18 December and 30 June.
Shares on issue
Approximately 399 million stapled securities, comprising one share in DigiCo StapleCo and one unit in DigiCo Trust, have been issued under the offer.
HMC Capital received an additional 100 million shares. The sellers of two properties received 50 million shares as partial consideration for their sale.
All up, DigiCo REIT has 549 million shares in the market, giving it a market capitalisation of $2,746 million.
The official settlement date is next Monday.
DigiCo REIT shares will commence trading on a normal settlement basis on 18 December.
