DigiCo REIT (ASX:DGT)a new real estate investment fund focused on data centers, has debuted on the ASX.
This is Australia’s largest initial public offering (IPO) in six years, since Viva Energy’s IPO. (ASX:VEA) Listing in 2018 and the largest real estate-related listing in over a decade. The IPO targeted $2 billion in capital, but was oversubscribed and raised to $2.746 billion.
However, despite the stock price rising 2% in the first two hours of trading, DGT ended the day down 9%, closing at $4.55 (compared to an issue price of $5).
Backed by HMC Capital
DigiCo’s IPO marks HMC Capital’s fourth listing in five years, following previous IPOs of Home Consortium, HomeCo Daily Needs REIT and HealthCo Healthcare and Wellness REIT. HMC retains an 18.2% stake in DigiCo following the listing.
HMC Capital has named former Global Switch executive director Damon Reid as head of DigiCo REIT, alongside Bryan Marsh and Chris Flynn, who were recruited following HMC’s acquisition of StratCap.
HMC shares ended the day down 7.24% at $11.27, but are up 85.36% year to date.
Valuation questions weigh
“There are a lot of questions about its underlying assets, so investors who jumped in were mainly looking for a quick profit,” said Jun Bei Liu, portfolio manager at Tribeca Investment Partners.
Analysts at Bloomberg Intelligence noted that the company’s portfolio was valued up to 70% higher than its Australian peers.
Investment research firm Morningstar valued the shares at $3.40, well below the $5 offering price, calling the offering’s valuation “optimistic” given the competitive nature of the investment sector. data centers.
Wallet
DigiCo currently operates three data centers and aims to expand to 13 properties across Australia and North America. Funds from the IPO will be used in part to complete the acquisition of Global Switch Australia, which has two adjacent data center sites in Sydney with a combined capacity of 20 megawatts. It is the only large-scale data center campus in the Sydney CBD. Once the acquisition is completed, DigiCo’s assets are expected to generate $118 million in revenue and $97 million in pre-tax profit on an annualized basis.
The REIT’s broader strategy is heavily focused on the United States, where it already has assets in Los Angeles, Kansas City, Chicago and Dallas.
HMC Capital chief executive David Di Pilla described the US as a “huge” opportunity, citing the size of its artificial intelligence (AI) market as a major driver of growth. “There are fewer than 10 listed groups like this in the world, but only one that will invest throughout the value chain. »
McKinsey & Co predicts that global demand for data center infrastructure will grow by 19-22% annually between 2023 and 2030.
The sector has seen some major deals this year, including Blackstone and Canada Pension Plan Investment Board’s $24 billion purchase of AirTrunk, as well as $1 billion investments by AustralianSuper in the sector.
