GDS Completes Landmark Data Center Asset Sale in China
GDS, a leading developer and operator of high-performance data centers in China, has announced a groundbreaking transaction in the country’s data center industry. This deal marks the first instance of data center asset monetization through a sale to a private Real Estate Investment Trust (REIT).
Key Details of the Transaction
The agreement involves GDS selling a 70% equity stake in several data centers, with an estimated enterprise value (EV) to EBITDA multiple of approximately 13.
Under the terms of the deal, GDS is transferring full ownership of specific data center project businesses to a private REIT (P-REIT). This specialized equity structure issues an Asset Backed Security (ABS), which will be listed on the Shanghai Stock Exchange as a standardized security product.
Leading Chinese institutional investors have primarily subscribed to the ABS, with China Life Insurance Company Limited acquiring a 70% stake. GDS retains the remaining 30%, ensuring it maintains operational control over the data centers.
Financial Structure and Industry Impact
The total enterprise value (EV) of the transaction is RMB 2.9 billion. With GDS reinvesting 30% into the ABS, the net equity consideration is approximately RMB 1.2 billion.
Upon closing, GDS expects to receive around RMB 500 million in net cash proceeds, with an additional RMB 700 million to be distributed upon achieving predefined data center ramp-up milestones. Following the transaction, GDS will deconsolidate these project businesses, along with associated outstanding debts and net liabilities totaling RMB 1.2 billion.
The P-REIT structure also provides opportunities for further financial optimization. Once qualified, the ABS can be transferred into a public REIT (C-REIT), creating additional liquidity and investment avenues in China’s expanding data center market.
A Milestone in China's Data Center Sector
William Huang, Chairman and CEO of GDS, emphasized the significance of this transaction as a major step in the company’s asset monetization strategy. He highlighted that this is the first successful P-REIT transaction in China’s data center industry, demonstrating strong investor confidence in both GDS and the sector’s growth potential.
Huang also acknowledged the crucial role played by China Life Investment Management Company Limited, which structured and coordinated the transaction.
Future Outlook
The deal is still subject to regulatory approvals and other closing conditions, with finalization expected within the next three months. As China’s data center sector continues to expand, this transaction could serve as a blueprint for future asset monetization strategies, potentially leading to more REIT-based investments in the industry.
