DigiCo Infrastructure REIT Shares Add 25% To Move Positive YTD: The Latest

DigiCo Infrastructure REIT shares (ASX:DGT) made a huge move on Wednesday, selling its Chicago data centre for US$750 million and redirecting capital toward its flagship Australian development while dramatically strengthening its balance sheet.

Shares in DigiCo Infrastructure REIT jumped 25% on Wednesday to close at A$2.95, pushing the stock back into positive territory for 2026 with a year-to-date gain of 6.5%. The rally came after the company announced a binding sale agreement for its CHI1 facility in Chicago, representing one of the most decisive strategic moves since the REIT’s formation.

The News Behind the Move

The centrepiece of the announcement was a binding agreement to sell the CHI1 Chicago data centre to an undisclosed North American fund manager for US$750 million, approximately A$1.06 billion at current exchange rates. The sale price represents a premium of roughly 5% above DigiCo’s original purchase price from November 2024, providing early validation of management’s underwriting and asset selection capabilities. Financial close is expected in the first quarter of FY27, with net cash proceeds of approximately A$360 million after repaying asset-level debt.

The transaction fundamentally reshapes DigiCo’s financial profile. Pro forma net debt will fall from A$1.5 billion to around A$500 million, while gearing drops from 36% to just 17%—a level that positions the REIT among the most conservatively leveraged digital infrastructure vehicles in the Australian market. Available liquidity is set to rise to approximately A$900 million, providing substantial capacity for growth capital without the need to return to equity markets in the near term.

The CHI1 disposal forms part of a broader capital recycling strategy that will see DigiCo monetise its LAX1 and LAX2 facilities in Los Angeles while retaining its Kansas City and Dallas-Fort Worth data centres. Interim CEO Chris Maher emphasised that releasing capital from CHI1 “provides additional financial flexibility and capacity to accelerate the delivery of the SYD1 development program,” the company’s 88-megawatt flagship campus in Sydney that now sits at the heart of the investment thesis.

Progress and Pipeline

DigiCo has achieved completion of the first 15 megawatts of a 20MW upgrade at SYD1, with the final 5MW section remaining on track for delivery by 30 June 2026. The broader 88MW expansion continues to advance through critical design and tender phases, with the company reaching a 70% design milestone and planning to appoint a head contractor in the third quarter of calendar 2026. First incremental capacity of 10MW is targeted for delivery in the second quarter of 2027, with remaining capacity to be delivered progressively through 2029.

Management continues to highlight strong customer demand for premium colocation services at SYD1, driven by the structural growth in cloud computing, artificial intelligence workloads, and enterprise digitalisation across the Australian market. The facility’s strategic location and scale position it as one of the most significant data centre developments in the Sydney metro area, where power availability and planning constraints have created a supply-constrained environment that supports pricing discipline.

The company reaffirmed its FY26 underlying EBITDA guidance of A$125 million, signalling that the strategic transition and asset sales do not disrupt near-term operational performance. More significantly, management guided that funds from operations will materially increase from FY27 onwards as US asset sales complete and capital is redeployed into higher-returning Australian developments. The combination of lower interest expense on reduced debt and improved operating leverage as SYD1 fills is expected to drive meaningful FFO accretion over the medium term.

What Next?

The board has flagged its intention to consider enhanced distributions and additional capital management initiatives in light of the improved balance sheet and liquidity position. While specific timing and quantum remain to be determined, management has articulated a longer-term ambition to distribute 90-100% of funds from operations to shareholders, aligning with traditional REIT structures and appealing to income-focused investors who have been underweight the digital infrastructure sector due to its growth-oriented capital allocation.

The distribution strategy represents a maturation of DigiCo’s business model, shifting from a pure development and acquisition story toward a more balanced profile that combines growth capital deployment with progressive income returns. For a REIT that has traded at a discount to net tangible assets for much of its short listed life, demonstrating discipline around shareholder returns while maintaining growth optionality could prove critical to closing the valuation gap with more established peers.

The CHI1 transaction provides a useful datapoint on private market appetite for stabilised data centre assets, with the premium to purchase price suggesting that institutional capital continues to view digital infrastructure as an attractive long-duration asset class despite rising interest rates and broader real estate headwinds. The ability to execute a sale at favourable economics less than 18 months after acquisition speaks to both asset quality and the depth of buyer demand in North American markets.

However, the strategic pivot also reflects the reality that DigiCo’s initial US expansion has not delivered the returns or strategic positioning that justify continued capital allocation to those markets relative to the opportunity set in Australia. By concentrating resources on SYD1 and exiting secondary US assets, management is effectively acknowledging that scale and competitive advantage in digital infrastructure require focus rather than geographic diversification for its own sake.

While markets have responded enthusiastically to the CHI1 announcement, several execution hurdles remain before the full benefits of the strategy are realised. Financial close on the Chicago sale lies in the first quarter of FY27, meaning the balance sheet benefits are not immediate and remain subject to customary closing conditions and potential delays. Any deterioration in credit markets or buyer financing conditions between now and settlement could theoretically put the transaction at risk, though the binding nature of the agreement and the institutional quality of the counterparty mitigate this concern.