HMC bets on digital future with $1.9bn data centre play
The funds house has snapped up a Sydney data centre and is chasing more assets in the US ahead of floating a new trust on the ASX.
Acquisitive funds manager HMC Capital will launch the country’s first data centre real estate investment trust after locking down the purchase of the local Global Switch business for $1.94bn.
After securing the Sydney site, HMC is now trying to buy new sites in the US as part of its broader digital strategy and wants to launch what it calls a world first style of trust on the Australian Securities Exchange to capitalise on the boom in the sector. HMC on Thursday undertook a $300m institutional placement to back the play.
The company said it intended to establish a global digital infrastructure platform comprising a global DigiCo Infrastructure REIT, that is intended to be listed on the ASX, alongside a new institutional unlisted fund.
HMC chief executive David Di Pilla said the acquisition of the Sydney-based data centre would seed the company’s digital push.
“Global Switch Australia is a strategically located Tier 1 asset with significant repositioning and expansion upside. This is consistent with our strategy to build a world-class global platform providing investors with exposure to institutional grade digital infrastructure assets underpinned by attractive megatrends,” he said.
Top global companies including Amazon and Microsoft are building new data centres to accommodate the demand prompted by AI and real estate company the Goodman Group is also rolling out centres around the world.
On a call with investors, HMC flagged the overall opportunity in the area could amount to $10-$20bn in coming years.
“Digital infrastructure represents a major funds management growth opportunity for HMC, and we believe the establishment of both a listed and unlisted vehicle will enable HMC to take advantage of high quality acquisition opportunities across the value chain to generate attractive risk adjusted returns. We have a number of additional exciting and complementary acquisition opportunities under advanced exclusive due diligence which are predominantly based in the US,” Mr Di Pilla said.
HMC struck terms to by Global Switch Australia for $1.937bn after a sales process in which it saw off larger rivals. Others to show interest in the centres include Stonepeak, Queensland Investment Corporation, and the Canada Pension Plan Investment Board HMC’s deal will close in the first quarter of 2025 when Global Switch Australia is acquired by the new DigiCo REIT.
The business now comprises two adjoining data centres in Sydney, and they are the only large-scale data centre campus in the densely-connected Sydney CBD. The location, near telecommunications exchanges, submarine cable Points of Presence and the city’s financial and commercial districts, gives it an edge.
Global Switch is a 26MW co-location data centre and the company it had identified a large development pipeline on the existing campus to grow the IT capacity to 88MW.
HMC said it had received positive early feedback from potential third-party investors seeking exposure to high quality digital infrastructure assets and is bullish about expanding in the US. It is targeting Tier 1 hyperscale and enterprise data centres, colocation facilities and higher returning development opportunities.
HMC undertook the placement at $8.75 per share, and after the equity raising it will have about $3bn of balance sheet underwriting capacity to support the acquisition and setting up the new trust.
The campus in Ultimo consists of a Harris Street property known as Sydney West, and one in Pyrmont Street known as Sydney East. The contest for Global Switch was partly sparked by Chinese steel giant Jiangsu Shagang Group taking control of the company about five years ago. A number of Australian governmental departments then left the Global Switch site.
Global Switch Australia CEO Damon Reid said the deal was a new chapter for the business. He said it would “accelerate our local investment and strategically position us for ongoing growth and improvement in the services we provide to our customers”.
“This extensive upgrade to our existing electrical and mechanical infrastructure includes increasing power densities and improving energy and water efficiencies for our customers as we approach 100MW of IT capacity,” he said.
Mr Reid said the upgrade to its Sydney campus would position it at the forefront of the latest customer demand for high performance computing and AI inference workloads.
“With the experience and expertise of HMC Capital, Global Switch Australia is primed to build on the momentum we have created in recent years and accelerate towards our strategic ambitions,” he said.
“We remain committed to setting global standards in digital infrastructure scale, resilience and connectivity. Our data centre campus is one of the best connected and certainly the best located site in the Australian market. It plays a critical role in our expanding digital infrastructure by providing the connectivity and scale in which modern businesses can rely.”
He flagged that the centre would seek to work with a range of new customers. “As a now wholly-owned Australian company, we will continue to work closely with the Australian Government on attaining the appropriate accreditation through the Hosting Certification Framework,” he said.
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