GDS to Bag $170M From Selling Data Centres to China Life-Backed Private REIT

Shanghai-based data centre firm GDS Holdings has agreed to sell some of its server-hosting facilities into a private REIT to be majority-owned by state-backed insurance giant China Life, with GDS expecting to net RMB 1.2 billion ($170 million) from the transaction.

The proposed trust will take the form of a private vehicle, a so-called P-REIT, involving the issue of an asset-backed security, GDS said Monday in a release. The ABS is 70 percent subscribed by Chinese institutional investors led by China Life, with GDS subscribing for the remaining 30 percent and retaining the operating rights for the target data centres.

NASDAQ-listed GDS, which owns and operates facilities in key mainland China cities, did not specify which properties would seed the REIT. The group’s data centres outside of mainland China are hived off in a separate unit formerly known as GDS International but recently rebranded as DayOne.

“We are delighted to announce this breakthrough deal for our asset monetisation programme,” said GDS chairman and CEO William Huang. “This is a first P-REIT transaction in the China data centre sector, featuring a true sale and successful monetisation of data centre assets.”

$400M Trust to Emerge

The total enterprise value for the transaction is RMB 2.9 billion ($400 million), encompassing a total equity consideration of up to RMB 1.7 billion — or RMB 1.2 billion net of the 30 percent reinvestment by GDS in the ABS — plus RMB 1.2 billion in existing debt and other liabilities tied to the seed assets.

GDS will receive net cash proceeds of RMB 500 million upon the deal’s closing, which is expected to take place within the next three months. The remaining net cash proceeds of RMB 700 million will be paid when certain milestones are met related to the ramp-up of the REIT’s underlying data centres.

The ABS will be listed on the Shanghai Stock Exchange as a standardised security product, with an eye towards eventual injection of the ABS into a public REIT vehicle, GDS said. The group didn’t reveal how it would utilise the net proceeds from sales to the trust, whose enterprise value is said to represent a multiple of 13 times earnings before interest, tax, depreciation and amortisation.

GDS said the backing of anchor investor China Life highlighted the insurer’s confidence in the group’s capabilities and the outlook for the data centre sector “as we move forward into the AI era.”

DayOne IPO Chatter

Bloomberg reported last month that GDS was considering a US initial public offering for DayOne, which operates the group’s overseas business in Hong Kong and Southeast Asia. The IPO could take place as soon as this year and raise up to $500 million, the news agency said, citing people familiar with the matter.

GDS holds a non-controlling 35.6 percent equity interest in DayOne, whose backers include US investment firms Coatue Management and Baupost Group, Masayoshi Son’s SoftBank Vision Fund and Citadel CEO Kenneth Griffin.

Analysts view DayOne’s renaming from GDS International as a move to distance the offshore arm from the China-based parent amid geopolitical risks and better position the unit for a potential public listing.

“The rebranding of GDS International to DayOne is a calculated step to present its international business as a distinct and autonomous entity which can resonate more strongly with global investors,” National University of Singapore professor and sustainable futures co-director PS Lee told Mingtiandi in February.