HMC Capital Ltd is moving swiftly to secure a $4 billion data centre fund listing on the ASX by next month, following its acquisition of the iseek co-location data centre platform for A$400 million which represents 19x CY25 forecast EBITDA.
The acquisition of the Australian-based platform paves the way for HMC’s new real estate investment trust (REIT) launch, positioning it as the largest property fund to list in more than a decade.
HMC’s previously proposed strategy to establish the ASX-listed DigiCo REIT by calendar year-end remains on track with the intention to raise around $2.6 billion of new equity which will be seeded with $4 billion+ of AUM at an implied FY25 EV/EBITDA multiple of 26.1x.
The company has committed to a minimum investment of A$500 million (approximately 19%) in DigiCo REIT.
Following a successful A$300 million equity raise and an A$150 million expansion of its corporate credit facility, HMC now has ample asset-level financing and balance sheet liquidity to underwrite the acquisition of DigiCo's initial assets.
If the DigiCo REIT IPO is delayed, HMC retains the flexibility to defer the settlement of the iseek acquisition until March 31, 2025. and, if necessary, to either postpone or cancel the settlement of its planned US acquisitions.
HMC has appointed former PricewaterhouseCoopers (PwC) executive Joseph Carrozzi as chair of the new REIT’s board, joined by notable figures such as former Labor party strategist Mark Arbib and ex-Liberal minister Kelly O’Dwyer.
The company is optimistic that retail investors and global institutions will be attracted by the growth potential of the data centre sector, fuelled by advancements in artificial intelligence (AI). The trust has outlined an ambitious strategy to expand its data centre portfolio globally, aiming to capitalise on increasing demand in this high-growth market.
Substantial data centre
The iseek deal secures a substantial data centre operating platform with six megawatts of existing IT capacity and a pipeline for nearly 28 megawatts of future expansion.
The transaction, structured with A$150 million in cash and A$250 million in scrip in the soon-to-be-launched DigiCo Infrastructure REIT, will be subject to escrow agreements with iseek’s key shareholders until fiscal years 2025 and 2026.
The acquisition adds to HMC’s A$2.5 billion in Australian strategic assets and sets the groundwork for a broader North American portfolio, which could increase DigiCo REIT’s assets under management to more than A$4 billion.
“iseek is a leading colocation data centre platform with a high quality and diverse customer base across government, hyperscale and enterprise customers,” HMC managing director and CEO David Di Pilla said.
:This acquisition is also highly complementary to our recent acquisition of Global Switch Australia with a number of benefits including enhanced geographic and customer diversification.
“The DigiCo platform will have over 100 dedicated people across iseek, Global Switch Australia and StratCap, and represents the beginning of our strategy to build a world-class operating platform providing investors with exposure to institutional grade digital infrastructure assets in both Australia and North America.”
National reach
iseek operates a portfolio of seven co-location data centres primarily situated in Queensland, South Australia and New South Wales, Australia. Key portfolio highlights include:
- A leading position in high-growth secondary markets, such as Brisbane and Adelaide, positioned to benefit from anticipated hyperscale edge deployments in the medium term.
- Established, long-term customer relationships across government, enterprise, and hyperscale tenants, with government clients comprising iseek’s largest customer segment.
- Clear visibility on near-term lease-up opportunities within existing facilities, supported by a robust sales pipeline, continued demand across submarkets, and under-utilised capacity.
- Long-term expansion potential across campuses, with strategically positioned assets offering development upside.
- Attractive financials, supported by a co-location-focused model complemented by private cloud and connectivity solutions.
Launching this year
The DigiCo REIT is expected to launch by the end of 2024 and will feature a diversified global portfolio of data centres, with anticipated returns from leasing, value-add, and development opportunities.
HMC Capital underscored its strong total return target, which includes a 4% distribution yield and development-driven growth with a forecast return on cost of over 10%.
A seasoned management team will lead the REIT’s expansion in key Australian and North American markets, where demand for co-location data centres continues to grow.