David Di Pilla says US a ‘huge’ opportunity for data centre REIT
HMC Capital’s David Di Pilla, the investment banker behind the ASX’s new data centre landlord, has set the $4 billion real estate investment trust’s sights on taking a larger slice of the US market, defying a soft start to trading on its sharemarket debut.
Seizing the US opportunity – home to the world’s biggest artificial intelligence customers – and delivering the hundreds of megawatts promised in its development pipeline will be keys to the success of the DigiCo Infrastructure REIT, Mr Di Pilla said on Friday.
The biggest IPO of the year closed 9 per cent below its $5 offer price at $4.55.
HMC Capital raised nearly $2 billion after acquiring a $4 billion portfolio of data centre assets in the US and Australia and selling shares in the enlarged business to new investors. Its data centres are at the centre of the AI boom and the need for data storage.
A “highly superstitious” Mr Di Pilla (Friday’s float coincided with December 13) told AFR Weekend he was “very excited about creating a globally relevant entity”.
With the demand to create and store data only accelerating, Mr Di Pilla said the magnitude of the opportunity was “huge, especially in the US, which is a market 20 times bigger than Australia”.
DigiCo already has a foothold in Los Angeles, Kansas City, Chicago and Dallas and a $1 billion pipeline through its ownership of digital infrastructure platform StratCap. It is looking for more assets.
“This is not an industry that sprouted out of the ground yesterday, it’s been around for 20 years, but the focus has intensified over the last three to four years.”
The world had created more data in the past two to three years than in all of human history, he added. “All this data that’s been created is needed to be stored, and that demand will keep accelerating into the future.”
DigiCo’s IPO follows Blackstone’s $24 billion purchase of local player AirTrunk and industrial giant Goodman Group’s evolution into a data centre-focused developer and manager.
For now, DigiCo boasts 76 megawatts of installed capacity with the ability to expand to 238 megawatts. Including Global Switch, an acquisition expected to settle next week, the assets are expected to generate $118 million of revenue this financial year and earnings before tax of $97 million on an annualised basis. The stock floated on a 4 per cent yield.
Mr Di Pilla reserved some criticism for DigiCo bears, such as investment research firm Morningstar which slapped a $3.40 valuation on the shares.
“The closest comparable entity trades at a materially higher earnings multiple,” he said, implying investors who participated in the float got a good deal.
DigiCo is HMC Capital’s fourth IPO in five years after it floated Home Consortium (the predecessor to HMC Capital) in 2019, mall landlord HomeCo Daily Needs REIT in 2020, and the underwater HealthCo Healthcare and Wellness REIT in 2021.
The REIT is not just an owner but an operator and developer too.
“Our global focus is important as well as our ability to invest right through the value chain, to own, manage and develop [data centres] is what makes us completely unique,” Mr Di Pilla said.
“There are less than 10 listed groups like this in the world, but only one that will invest right through the value chain. So DigiCo REIT has got some very unique characteristics,” he said.
HMC Capital installed former Global Switch executive director Damon Reid to lead DigiCo REIT and Bryan Marsh and Chris Flynn, who joined HMC via the acquisition of their firm StratCap, to head its US business.
The float was given a boost on Friday morning when the Foreign Investment Review Board granted approval for acquisition of a key asset, the $2 billion Global Switch data centre campus on the fringe of the Sydney CBD.
