A real estate investment trust under formation in Australia has started assembling a portfolio of U.S. data center properties, adding to the list of global investors with eyes on the property type.
Alternative asset manager HMC Capital said its new subsidiary, DigiCo Infrastructure REIT, completed the acquisition of three properties for a combined $512 million and has two more under contract expected to close this week. That would give it an initial U.S. portfolio valued at nearly $1 billion.
The REIT plans to own an even larger data center portfolio in Australia. In October, it agreed to buy data center operator Global Switch Australia for $1.2 billion.
The expansion of artificial intelligence and cloud computing has led to data center demand outpacing supply, according to real estate analysts. The trend has caused a flurry of investment activity around the world.
HMC Capital is not the only firm building up data center holdings in the United States and Australia. In September, private equity giant Blackstone and the Canada Pension Plan Investment Board formed a partnership to buy AirTrunk, an Asia-Pacific data center operator in a deal valued at $22 billion. AirTrunk operates data centers in Australia, Singapore, Hong Kong, Japan and Malaysia.
Already with $70 billion invested in data centers, Blackstone said at the time that the AirTrunk transaction is part of $100 billion more in deals it has in its investment pipeline, including properties under construction.
Other major investors have recently announced U.S. data center investments. Private equity firms Blue Owl Capital and Partners Group are leading nearly $7 billion in new investments in data center development.
Last week, the brokerage Newmark Group arranged a $600 million loan for Blue Owl to finance a build-to-suit data center in the Chirisa Technology Park in Richmond, Virginia.
Conversions to start
DigiCo REIT’s investment objective is to invest in a range of data center opportunities, including existing properties, conversions and new developments, the company said in a filing with the Australian Securities Exchange. Its first three U.S. purchases are all property conversions.
U.S. industrial REIT giant Prologis announced the sale of one of those properties last week. The company sold a 189,240-square-foot warehouse at 800-890 E. Devon Ave. in Elk Grove Village, Illinois, that it is converting into a data center.
DigiCo, through HMC Capital, paid $439.66 million for the property, CoStar data shows.
The turnkey data center "is located in a tier one market and underpinned by long-term contracted cash flows,” David Di Pilla, HMC Capital CEO and managing director, said in a statement. “This will be a marquee asset for our newly established DigiCo Infrastructure REIT, which will own [a $2.74 billion] portfolio of data centers in Australia and the United States."
Last quarter, DataCenterHawk, a company that provides data and analytics for the data center industry, signed a full-building lease for the Elk Grove Village property, according to CoStar data.
Goldman Sachs provided more than $1 billion in financing to DigiCo for its U.S. acquisitions, public records show.
In October, the REIT acquired two empty office buildings in Monterey, California, that will be converted to data centers, according to DigiCo’s filing. It bought the 205,628-square-foot 1977 Saturn St. building for $39 million and the neighboring 410,439-square-foot 1980 Saturn building for $33.5 million, CoStar data shows.
DigiCo is also under contract to acquire data centers in the Dallas and Kansas City, Missouri, markets, according to its filing. The closing on those purchases is expected to occur Tuesday.
Based on property descriptions and photographs in DigiCo’s filing, those properties appear to be 1402 E. Lookout Drive in Richardson, Texas, and 24400 W. Valley Parkway in Olathe, Kansas. The properties are 100% occupied by State Farm, according to CoStar data.
HMC Capital did not immediately respond to CoStar News' request to comment.