DigiCo Infrastructure REIT has agreed to sell its Chicago data centre for US$750 million, reducing net debt by two-thirds and freeing capital to fast-track its Sydney SYD1 development.
- Chicago asset sold at 5% premium for US$750m
- Net debt cut from $1.5bn to ~$0.5bn
- Gearing halved to 17%, liquidity rises to $0.9bn
- SYD1 88MW Sydney expansion accelerated
- Plans for enhanced distributions and capital management
Chicago Asset Sale Boosts Balance Sheet
DigiCo Infrastructure REIT (ASX:DGT) has struck a binding deal to sell its Chicago data centre (CHI1) for US$750 million, roughly 5% above its November 2024 purchase price. The transaction, expected to close in Q1 FY27, values the asset at a passing yield of 5.8%, aligning with its carrying cost. This sale is a pivotal move for DigiCo, releasing approximately $360 million in net cash proceeds after repaying asset-level debt.
The capital release is set to dramatically reduce net debt from $1.5 billion at the end of 2025 to about $0.5 billion on a pro-forma basis, while gearing drops from 36% to 17%. Available liquidity will rise to nearly $900 million, providing DigiCo with a much stronger financial footing.
This transaction fits within DigiCo’s broader strategy of capital recycling to close the discount to net asset value, as outlined in its 1H FY26 update. The company is also exploring options to monetise its Los Angeles sites (LAX1 and LAX2), though details remain forthcoming.
Accelerated Sydney SYD1 Development
The freed-up capital is earmarked for accelerating the SYD1 88MW expansion project in Sydney, which DigiCo describes as its most compelling growth opportunity. Practical completion of the first 15MW upgrade has been achieved, with the remaining 5MW due by June 30, 2026. The project, positioned as a Tier 1, network-dense colocation facility with over 120 interconnected networks, continues to attract strong customer demand.
Interim CEO Chris Maher highlighted that design and tender documentation for the expansion are progressing, with a 70% design milestone reached and a head contractor appointment planned for Q3 CY2026. The expansion is planned for staged delivery over the next three years, targeting 10MW capacity by Q2 CY2027. This development is expected to generate attractive returns, underpinning DigiCo’s growth trajectory and supporting enhanced distributions.
DigiCo’s ability to execute complex upgrades within live facilities was demonstrated by the recent SYD1 milestone, reinforcing confidence in the project’s delivery and accretive potential. This aligns with the company’s recent SYD1 expansion approval and the robust growth reported in its SYD1 expansion momentum during 1H FY26.
Stable US Assets and Capital Management Plans
Meanwhile, DigiCo will continue to manage its Kansas City (KCM1) and Dallas Fort Worth (DAL1) data centres, which are delivering strong, stabilised returns. The company’s focus remains on maximising value from these assets over the medium term.
With the balance sheet strengthened, DigiCo plans to explore capital management initiatives, including the possibility of returning excess capital to securityholders via enhanced distributions above Funds From Operations (FFO) in the short term. The company maintains its medium-term policy of distributing 90-100% of FFO to deliver sustainable and growing returns.
DigiCo reaffirmed its FY26 underlying EBITDA guidance of $125 million, noting that the US asset sales are expected to be materially FFO accretive from FY27. This improved financial position supports the funding of the SYD1 expansion, which is forecast to drive strong EBITDA and FFO growth over the next four years, bolstering the yield and growth proposition for investors.
The company’s recent distribution declaration for 1H FY26 underscores its commitment to delivering steady income from a diversified portfolio amid ongoing development.
Bottom Line?
DigiCo’s decisive asset sale and debt reduction set the stage for accelerated Sydney growth and potential enhanced returns, but execution on LAX site sales and SYD1 delivery remains critical.
Questions in the middle?
- How will DigiCo’s plans for LAX1 and LAX2 asset sales unfold and impact capital allocation?
- Can the SYD1 expansion maintain its strong demand pipeline amid evolving market conditions?
- What form and timing will DigiCo’s enhanced distribution initiatives take following balance sheet strengthening?