AI craze is minting fortunes as it locks in year’s biggest IPO

Real estate dynamo David Di Pilla’s HMC Capital has pulled off Australia’s biggest new public company listing in years, fuelled by investors wanting to tap into the explosive growth of AI-driven data centres.

HMC’s well-publicised initial public offering, the DigiCo REIT, will begin trading on the Australian stock exchange on December 12 at a market capitalisation of $2.74 billion after securing underwriting from banks and other big investors.

David Di Pilla sees strong growth prospects in the US for the new DigiCo REIT.Credit: Flavio Brancaleone

Such was the enthusiasm among underwriters for the new digital infrastructure property trust that its capitalisation was upsized by $100 million to cater for demand.

“That reflects the quality of the underlying assets and the desire of investors to get exposure to the digital sector, clearly something that’s hard to get high-quality exposure to,” Di Pilla said.

The global growth of ChatGPT, video made on Synthesys and other AI applications is not just turbocharging the fortunes for the world’s biggest companies such as Nvidia, Amazon and Alphabet, but is also benefiting property firms that manage and lease data centres, where megawatts of information are stored and served up to the cloud.

A data centre’s capacity is measured in megawatts because of the huge amount of energy needed to power its servers and cooling systems.

The sector’s value became evident in September when AirTrunk founder Robin Khuda, and co-owner Macquarie, clinched the sale of his nine-year-old data centre business to US investment giant Blackstone in a deal worth $23.5 billion, cementing Khuda’s billionaire status.

Morgan Stanley recently upped its 2030 energy consumption forecasts for Australia’s data centres by 700 megawatts to 3200 megawatts, a considerable uptick from the 2 per cent of electricity they consume now to about 8 per cent of the country’s total generation in six years’ time.

DigiCo’s Australian and American data centres expect to tap into that forecast.

HMC wrangled two sizeable property deals over the past two months to seed the new company and support its underlying infrastructure and growth prospects. It secured data centre manager Global Switch Australia in a $1.9 billion deal in October and then tied up another, iseek, this month in a $400 million acquisition. DigiCo’s portfolio will initially hold 13 assets.

Di Pilla said Global Switch’s two large-scale developments in inner Sydney have options for sizeable growth. Currently measured at 26 megawatts, they can reach installed capacity of 88 megawatts, which will make them among the largest in Australia.

Morgan Stanley recently upped its 2030 energy consumption forecasts for Australia’s data centres by 700 megawatts to 3200 megawatts.Credit:

There are also strong growth prospects in the US, he said. “We see the market opportunity in America being potentially 10 times the size of any other market in the world. For DigiCo, the US is going to be a big focus,” he said.

HMC’s ascent in the property sector has been meteoric since Di Pilla swooped on the cast-off superstores that Woolworths left empty after its 2019 failed attempt to break Bunnings’ stranglehold on the country’s hardware sector.

Originally called HomeCo, the company he founded with the backing of Melbourne-based Chemist Warehouse owners Mario Verrocchi and Jack Gance and retail rich-listers Zac Fried and Morry Fraid (who own the Anaconda and Spotlight stores), turned the unloved Masters superstores into a nationwide big box retail fiefdom.

It has since transformed itself into a prolific revenue- and asset-generating property manager, which is now valued around $11.70 per share after originally hitting the Australian index at $3.64.

In the intervening years, the company has spawned the HealthCo Healthcare and Wellness REIT, a retail-based Daily Needs REIT, and the private equity HMC Capital Partners Fund. Later this year it expects to launch an Energy Transition Platform chaired by former PM Julia Gillard.

The new REIT’s prospectus and product disclosure statement was lodged with ASIC on Thursday.

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