DigiCo Infrastructure REIT (ASX:DGT) US$750m sale cuts debt and funds SYD1

DigiCo Infrastructure REIT (ASX:DGT) has made the kind of move investors usually ask for when a stock is trading below its asset value. It has sold a major offshore asset, cut balance sheet risk and redirected capital toward the growth project it believes can deliver better returns.

The binding sale of the CHI1 Chicago data centre for US$750 million does not just tidy up the portfolio. It reduces pro forma net debt from A$1.5 billion to around A$0.5 billion and cuts gearing from 36% to 17%.

That matters because DigiCo had been carrying a heavy balance sheet while still needing to fund the SYD1 Sydney expansion. The sale gives the company a cleaner way to keep building without leaning too hard on securityholders.

The market will still need to see execution. But this update changes the story from one about gearing pressure to one about whether the company can recycle capital into a higher returning Australian data centre platform.

The Chicago sale is more about capital discipline than exiting the US

DigiCo is selling CHI1 at a roughly 5% premium to its November 2024 purchase price. The asset also sold at a 5.8% passing yield and broadly in line with its carrying cost.

That tells investors the company has not been forced into a distressed sale. It is choosing to release capital from a lower priority asset and redeploy it into a project where management sees stronger economics.

The company is also exploring options for LAX1 and LAX2, while keeping Kansas City and Dallas Fort Worth because those assets continue to deliver stronger stabilised returns. That is a more selective US strategy, not a full retreat.

SYD1 is now the centre of the investment case

The most important use of the released capital is the 88MW SYD1 expansion. DigiCo says the strengthened balance sheet gives it enough funding to progress the full project while staying within its target gearing range.

The first 15MW of the 20MW upgrade has reached practical completion, with the remaining 5MW on track before 30 June 2026. That helps prove the company can execute upgrades inside a live operating facility.

The larger expansion is also moving forward, with the 70% design milestone achieved and a head contractor expected in Q3 CY2026. The first 10MW of new capacity is targeting delivery in Q2 CY2027.

Lower gearing could support better distributions

The balance sheet reset also opens the door for capital management. DigiCo said it intends to explore initiatives that could include enhanced distributions above Funds From Operations in the short term.

That is important because investors in REITs care about both asset growth and income certainty. A lower debt load gives the company more flexibility to fund SYD1 and still think about near term securityholder returns.

Management also reaffirmed FY26 Underlying EBITDA guidance of A$125 million. That means the sale is being framed as a FY27 and beyond accretion story, not a downgrade to the current year.

The Investors Takeaway for DigiCo Infrastructure REIT

DigiCo has taken a practical step toward closing the gap between its growth ambitions and balance sheet capacity. The sale of CHI1 lowers financial risk, simplifies the story and puts more attention on SYD1.

The key watchpoint is whether SYD1 demand converts into contracted capacity on attractive terms. If that happens, the stock may start to look less like a leveraged data centre REIT and more like a focused Australian digital infrastructure growth vehicle.

The risk is that execution slips or development returns fall short of what management is signalling. But for now, this update gives investors a clearer capital pathway than they had before. Investors can find more in depth coverage of ASX listed data centre and property names here at stocksdownunder.