Chinese data center operator GDS Holdings is selling some of its data centers to a private real estate investment trust (REIT).
The company this week announced that it has entered into definitive agreements to monetize, on a net basis, a 70 percent equity interest in some of its data centers.
GDS is selling a 100 percent equity interest in certain data center project companies to a private REIT. The deal is set to close within the next three months.
Details on which data centers are to be moved to the new REIT have not been shared, but GDS said it will retain the rights for the ongoing operation of the data centers.
The REIT is a special-purpose equity scheme involving the issue of an Asset Backed Security (ABS). The ABS was led by China Life Insurance Company Limited, with GDS subscribing to 30 percent.
The total enterprise valuation for the transaction is up to approximately RMB 2.9 billion ($400.8m). The total equity consideration for GDS is up to approximately RMB 1.2 billion ($165.8m) inclusive of the company’s 30 percent stake in the ABS.
GDS will receive net cash proceeds of approximately RMB 500 million ($69.1m) at closing. The remainder will be paid when certain milestones relating to the ramp-up of the data centers are met.
“We are delighted to announce this breakthrough deal for our asset monetization program,” said William Huang, chairman and CEO of GDS. “This is a first P-REIT transaction in the China data center sector, featuring a true sale and successful monetization of data center assets.”
He continued: “We highly appreciate the participation from China Life as anchor investor, and China Life Investment Management Company Limited as coordinator and advisor, which highlights their confidence in our capabilities as a leading data center operator in China, as well as in the outlook for the sector as we move forward into the AI era.”
GDS Holdings was founded in 2006 and operates dozens of data centers across Greater China, including Suzhou Kunshan, Chengdu, Shanghai, Shenzhen, and Beijing.
The company has been trading in New York since 2016 when it raised about $200 million in an initial public offering. It was listed in Hong Kong in 2020, raising around HK$14.9 billion ($1.9 billion). STT GDC and Hillhouse are existing investors in GDS.
GDS is rumored to be considering an IPO for its international business, which includes data centers in operation and development across Hong Kong, Singapore, Malaysia (Johor), Indonesia (Batam), and Japan (Tokyo). That unit was recently rebranded as DayOne.
