Highlights

  • DigiCo Infrastructure REIT has entered into a binding agreement to sell its Chicago (CHI1) data centre facility for US$750 million, representing a premium of approximately 5% to the November 2024 purchase price and reducing pro-forma gearing from 36% to 17%.
  • Net cash proceeds from the CHI1 sale are expected to reach approximately $360 million after repayment of asset-level debt, with available liquidity increasing to approximately $0.9 billion and enabling full funding of the highly accretive 88MW SYD1 development program.
  • DGT reaffirmed FY26 Underlying EBITDA guidance of $125 million and indicated that the US asset sales are expected to be materially FFO accretive from FY27, with management also flagging intentions to explore capital management initiatives including enhanced distributions.

 

DigiCo Infrastructure REIT (ASX:DGT) delivered one of the most dramatic single-session share price moves of 6 May 2026, surging 22.03% to $2.88. The gain of $0.52 in a single trading day was driven by the binding announcement of the US$750 million sale of its Chicago data centre facility and the strategic pivot this enables toward accelerating its Sydney SYD1 development. For a listed REIT structure, a one-day move of this magnitude is exceptional and reflects the degree to which the market had been pricing in uncertainty around the company's capital structure and its ability to fund its growth pipeline while managing elevated gearing.

The scale of the intraday reaction underlines how significantly the CHI1 announcement changed the market's assessment of DGT's financial position and earnings trajectory. Prior to the announcement, the company's gearing of 36% as at 31 December 2025 and a net debt position of $1.5 billion had been a source of investor concern, particularly in a higher-for-longer interest rate environment where highly leveraged REITs face amplified risk. The CHI1 sale, which is expected to reach financial close in Q1 FY27, effectively resolves this overhang at a stroke.

The CHI1 Transaction: Price, Proceeds and Strategic Logic

The binding agreement to sell the Chicago (CHI1) data centre facility for US$750 million to a North American fund manager with extensive data centre experience represents a notable outcome for DGT securityholders. The price reflects a premium of approximately 5% to the November 2024 acquisition price — modest in absolute percentage terms but meaningful as a validation that the asset was not acquired at the top of the market, and that DGT has preserved capital while holding the facility. The passing yield of 5.8% and the sale being in line with the all-in carrying cost of the asset confirms that the transaction is financially neutral to marginally accretive on a cost basis.

The more transformative impact comes from the proceeds. Net cash proceeds from the CHI1 sale are estimated at approximately $360 million after repayment of asset-level debt, assuming a 0.71 AUD/USD exchange rate. This inflow, combined with the actual net debt position as at 30 April 2026, is expected to reduce pro-forma net debt from $1.5 billion to approximately $0.5 billion and gearing from 36% to 17%. Available liquidity is expected to increase to approximately $0.9 billion. This is not simply a deleveraging story — it is a strategic redeployment of capital from a stabilised US asset to the highest-returning development opportunity in the portfolio.

SYD1 Expansion: The 88MW Opportunity

The proceeds from the CHI1 sale directly fund the full 88MW SYD1 development program — and management has explicitly described this redeployment as the primary rationale for the transaction. SYD1, located in Sydney, has achieved Certified Strategic status under the Australian Government's Hosting Certification Framework, a designation that underscores its strategic importance to the domestic digital infrastructure landscape. With approximately 120 network interconnections and deep colocation capability, SYD1 is positioned as a globally relevant, network-dense asset in a Tier 1 market.

The first 15MW of a 20MW upgrade reached practical completion ahead of the announcement, with the remaining 5MW on track for delivery before 30 June 2026. The broader 88MW expansion program is advancing rapidly, with 70% design milestone achieved and a head contractor appointment expected in Q3 CY2026. The first 10MW of additional capacity from the expansion is targeting delivery in Q2 CY2027, with the remaining capacity planned for progressive delivery over the following two to three years. Interim CEO Chris Maher described the demand pipeline for the remaining capacity as strong and expected to generate attractive returns — a characterisation that the market appears to have embraced given the magnitude of the share price response.

Capital Management: Enhanced Distributions on the Horizon

One of the more investor-friendly elements of the 6 May 2026 announcement was the explicit flagging of capital management initiatives. DGT management indicated that given the expected proceeds from US asset sales and the resulting lower gearing, the trust intends to explore distributing any excess capital through enhanced distributions above Funds From Operations in the short term. This signal of potential special or enhanced distributions to securityholders adds a near-term yield dimension to what had previously been a largely growth-oriented investment thesis.

Over the medium term, DGT reaffirmed its distribution policy of paying out 90% to 100% of FFO, which it expects to grow materially as the SYD1 expansion comes online. The US asset sales are expected to be materially FFO accretive from FY27, meaning that the forward distribution base is expected to grow even as gearing falls. For income-oriented REIT investors, this combination of lower risk, higher liquidity and growing distributions represents a meaningfully improved risk-return proposition relative to the pre-announcement capital structure.

Remaining US Portfolio and LAX Assets

While CHI1 is being sold, DGT confirmed that its Kansas City (KCM1) and Dallas Fort Worth (DAL1) data centres continue to deliver strong stabilised asset returns. Management has indicated it will continue to actively manage these facilities with a focus on maximising value for securityholders over the medium term. Additionally, DGT has determined that monetising its LAX1 and LAX2 sites in the Los Angeles area is in the best interests of securityholders, and is currently exploring options to realise value for these assets. Any additional proceeds from the LAX sites would provide further upside to the already transformed balance sheet position.

Outlook: A Recalibrated Portfolio for Growth

The 6 May announcement represents a fundamental recalibration of DigiCo Infrastructure REIT's portfolio and capital structure. By recycling capital from a stabilised US asset into a higher-returning domestic development opportunity, reducing gearing by more than half, improving liquidity to nearly $0.9 billion and signalling enhanced distributions, management has addressed the key investor concerns that had weighed on the stock. The combination of reaffirmed FY26 EBITDA guidance, FFO-accretive US sales from FY27, and the compelling SYD1 growth runway positions DGT with a stronger and more focused investment proposition as it enters the second half of FY26.