HMC snaps up data centres on way to $4bn float as AI revolution takes off

The company has snaffled two major portfolios in Australia and has tied up more in the US on the way to the float of the year.

HMC Capital boss David Di Pilla. Picture: Jane Dempster/The Australian

The acquisitive HMC Capital has signalled it will go all out to list a $4bn data centre fund on the Australian Securities Exchange by next month as it struck a deal to buy the iseek data centre operating platform for $400m.

The purchase of the Australian operation will see its owners now back the launch of HMC’s new real estate investment trust, which will be the largest property owner to launch in more than a decade.

With the new trust will be the largest IPO seen since Medibank floated on the ASX and HMC’s ambitions of growing to an overall $10bn-$20bn in the sector make more capital raisings likely in future.

The new fund is seeking to bring in about $2.6bn in total, with $250m of this coming from the iseek owners rolling their equity in and an HMC co-investment of up to $750m. The assets are operating data centres with expansion potential so not purely passive real estate in a traditional sense, with the fund billed as a growth play.

The vehicle will be overseen by a series of high-profile figures, with HMC tapping former Sydney PwC heavyweight Joseph Carrozzi to chair the new trust’s board, which also includes ex-Labor powerbroker Mark Arbib and former Liberal minister Kelly O’Dwyer.

The company is betting that retail investors and global institutions will chase the promise offered by the hot sector as the AI revolution takes off, with the trust flagging an aggressive strategy to roll out data centres around the world.

Indicative retail demand is running at more than $1bn with HMC also chasing global players to cornerstone the IPO, with the company to also tap a chairman’s list for major backers. The manager is hoping for a relatively tight register that will create a need for institutions to invest in the trust once it has floated.

The plan to get the company on to the ASX by mid-December comes hot on the heels of HMC’s move to set up a global digital infrastructure platform. It has now secured $2.5bn of operating assets in Australia and is in exclusive due-diligence on another $1.6bn of data centre assets in North America.

HMC chief executive David Di Pilla says iseek was a top colocation data centre platform with high quality customers across government, hyperscale and enterprise customers.

“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,” he said.

“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,” he said.

iseek chief executive Scott Hicks, and founder Jason Gomersall, said that partnering with HMC’s DigiCo platform would accelerate iseek’s next phase of growth. “A significant portion of the acquisition proceeds will be taken in scrip in the DigiCo Infrastructure REIT IPO which is a testament to our strong conviction in the REIT’s investment strategy and growth runway,” they said. The REIT will have close to $4.2bn of assets under management.

The iseek acquisition price of $400m showed 19 times forecast earnings before interest, taxes, depreciation, and amortisation this financial year. The deal is structured with $150m upfront cash and $250m of scrip in the REIT, which shareholders and founders agreed to escrow mainly until the fiscal 2026 results.

HMC said the business it had bought was a scalable co-location data centre platform with 6MW of Installed IT capacity across seven operating facilities located across Queensland, SA and NSW and a 27.6MW development pipeline of future expansion IT capacity.

HMC said its previous strategy to establish the ASX-listed REIT by calendar year-end remains on-track and the assets were going into the fund at an implied earnings multiple of 26.1 times.

The trust will target total returns driven by its relatively low target distribution yield of 4 per cent plus growth from contracted revenue growth, lease-up and value-add opportunities and developments.

HMC has refused to disclose assets that it is buying in the US, saying that they were data centres in Chicago, Kansas City and Dallas Fort Worth, but it could not say more due to data privacy and security concerns.

But it has current installed IT capacity of 76MW with a significant embedded growth pipeline comprising more than 161MW of planned IT capacity across Australia and North America, with target development returns of 10 per cent yield on cost.

Investors will likely chase the float as it is in a fast moving sector that is riding the growth in cloud and AI computing, so demand for space will continue to be strong.

Analysts have dubbed HMC’s acquisitions as “very aggressive” noting the company is paying up for data centres that do not have much power capacity, which may make it tougher to deliver returns for investors in the long term.

The new HMC vehicle will also face questions about how it will fund the capital expenditure to dramatically boost the capacity of its data centres. The vehicle will be up against rival data centre players like NextDC and the Goodman Group, which is switching focus to the area as well as global giants.

HMC’s earlier listed vehicles, particularly a health real estate fund, have also underperformed and bankers noted that HMC was at risk of overstretching by warehousing assets on balance sheet.

But HMC is riding high and said its successful $300m equity raising and $150m upsize in its corporate credit facility gave it the firepower to secure the assets. However,

in a nod to global volatility, HMC said that if the DigiCo REIT IPO was delayed, it had the ability to defer settlement of the iseek acquisition until the end of March and to not proceed or defer settlement of the US acquisitions.