Looking at REITs from GDS.US: Asset Securitization Reshapes the Data Center Industry

On the path to asset securitization, GDS.US (GDS.US) has taken another critical step.

According to the official website of the Shanghai Stock Exchange, the Southern World Data Center Closed Infrastructure Securities Investment Fund (hereinafter referred to as “Southern World Data Center REIT”), with Wanguo Data as the original shareholder, was “accepted” on March 26. Zhitong Finance learned that the fund initiated the application process on March 25 and was accepted by the Shanghai Stock Exchange just 1 day later. As one of the first public data center REITs in the market, once the Southern World Data Center REIT was disclosed, it quickly attracted widespread attention in the market.

At the beginning of March this year, WDS successfully issued China's first data center held real estate asset-backed securities (ABS), which is regarded by the market as the first private equity REIT in the IDC industry. After a lapse of less than a month, this public REIT filing further strengthened Wanguo Data's first-mover advantage in capital support for new infrastructure.

Industry insiders told Zhitong Finance that the launch of the Southern World Data Center REIT is a landmark in the industry. “Data center REITs have both 'technology+real estate' attributes. Cash flow is more stable than traditional commercial real estate, and the valuation system is expected to move closer to growth stocks. In a low interest rate environment, its relatively stable dividend mechanism is also highly attractive to insurance capital, bank financial management, etc.”

Scarce high-quality assets build the foundation of REITs

Zhitong Finance learned that the Southern World Data Center REIT uses a “public fund+infrastructure asset support securities” two-tier structure. More than 80% of the assets will invest in underlying infrastructure asset support securities, penetrate through holding all shares in the Kunshan Guojin Data Cloud Computing Data Center Project (“Guojin Data Center”), and obtain stable cash flow such as cabinet hosting service fee revenue through specialized operations. This product has China Southern Fund as fund manager, China Merchants Bank as fund custodian, and Huatai United Securities as financial advisor.

The fund's core asset is the Guojin Data Center. With September 30, 2024 as the reference date, the project valuation is RMB 2.95 billion (the valuation is subject to the final regulatory approval version). Based on the asset valuation at this point, the fund's proposed fundraising scale is 2,265 billion yuan (the valuation is subject to the final regulatory approval version).

The reason why the Guojin Data Center can obtain a high valuation is due to its high quality and scarce asset characteristics. The data center is located in Huaqiao Town, Kunshan City, Suzhou City, Jiangsu Province. It covers an area of nearly 20,000 square meters, has a construction area of 354,000 square meters, and is equipped with 4,192 cabinets. This region is the core area of data demand in the Yangtze River Delta, and is a key point in the strategic layout of “East Digital Western Computing”.

The Yangtze River Delta region is economically developed, industrial agglomeration, and a large number of large enterprises and Internet giants have gathered to generate massive data processing and storage requirements. With its superior geographical location, the Guojin Data Center can quickly respond to customer needs and provide efficient data center services. At the same time, the region has complete network infrastructure and sufficient and stable energy supply, which provides a solid guarantee for the operation of the data center.

According to the REIT recruitment brochure, the average contract rate for the past three years and the most recent installment was 100%, the billing rate has stabilized at over 90%, and the escrow service fee collection rate has reached 100%.

It is worth mentioning that at a time when green development has become a global consensus, the proportion of renewable energy used in Guojin data centers has reached 100%, which not only conforms to the global green development trend, helps enterprises to operate sustainably in the long term, but also reflects investors' attention to green environmental protection projects.

The steady operation of the company provides support for asset securitization

The high-quality assets of the Guojin Data Center have laid a good foundation for Wanguo Data to carry out REITs projects, and the company's steady business performance has further provided strong support for asset securitization.

In 2024, Wanguo Data achieved net revenue of 10.322 billion yuan, up 5.5% year on year; adjusted EBITDA reached 4.886.4 billion yuan, up 3% year on year; adjusted EBITDA ratio was 47.2%, and annual net profit was 3.304 billion yuan.

DayOne Data's overseas operating brand, DayOne Data Centers Limited completed Series B equity financing on December 31, 2024. The company diluted its shares and used DayOne as an equity investment target, and the performance was no longer shared. Without considering the impact of DayOne's “publication,” GDS's 2024 results have exceeded expectations, showing strong endogenous growth momentum and resilience to risks.

Looking ahead to 2025, WDS will focus on AI inference demand and production capacity release in the Tier1 market, and performance is expected to improve further.

According to Zhitong Finance, Wanguo Data has established a perfect layout in Beijing, Shanghai, Shenzhen and surrounding cities. It has nearly gigawatts of developable capacity, fully adapting to AI inference needs. In the first quarter of 2025, the company has received 152 MW of AI-related orders, which are expected to be delivered within 6 months. This is the largest single order in the company's history in China, and it also confirms the technical advantages of GDS in the field of high-power intelligent computing centers.

Although major manufacturers have an implementation cycle of 12-18 months, the explosion in demand for AI-driven computing power is already a definite trend. The advance layout of Universal Data has consolidated its first-mover advantage in the AI computing power infrastructure market. Looking at business development, these orders are expected to gradually transform into performance growth over the next 2-3 years, bringing stable revenue to the company, thereby further enhancing its profitability.

Asset securitization catalyzes the release of multiple values

With scarce high-quality assets and steady operating performance, GDS has taken the lead in IDC's asset securitization path. The advantages at the macroeconomic policy level also provide room for imagination for the future development of its asset securitization.

On February 7, the “Implementation Opinions on the “Five Major Articles” on Good Finance in the Capital Market issued by the China Securities Regulatory Commission clearly proposed “normalizing the promotion of the distribution of new infrastructure REITs” and included new infrastructure projects such as data centers and 5G base stations in the priority support category.

WDS told Zhitong Finance that in the era of rapid development of the digital economy, WDS has responded positively to the country's policy call to “encourage private enterprises to participate in the investment construction and application innovation of new infrastructure such as data centers and industrial Internet”, actively revitalize their existing assets, use recovered capital for reinvestment, continue to expand investment and construction of new infrastructure in China, and make its own contribution to the development of new quality productivity.
From a financial perspective, the issuance of REITs will bring capital inflows to Wanguo Data, which will not only effectively improve the company's cash flow, optimize operational efficiency without increasing debt, but also enhance the company's ability to cope with market risks. With funds raised by REITs, WDS was able to invest in the construction of new data center projects, improve the nationwide data center layout, and be the first to win market dividends under the burgeoning trend of domestic demand for artificial intelligence computing power.

It can be said that asset securitization is driving Wanguo Data from a traditional asset-heavy operating model to an “asset-light” model. In this transformation process, the company can focus more resources on core business, obtain benefits through asset monetization and continuous operation management, improve capital operation efficiency, and achieve flexible asset allocation, so as to better adapt to market changes and achieve sustainable development.

Conclusions

By issuing REITs, GDS has made significant progress in market-based pricing of asset values and improving liquidity. The company can revitalize existing assets through continuous securitization, establish a virtuous cycle of “investment - construction - operation - exit - reinvestment”, and continuously improve its business layout and technology upgrade.

This strategic layout not only opens up a new growth path for itself, but also provides experience for the development of asset securitization in China's digital infrastructure industry. Under the wave of AI and digitalization, with the trend of policies, GDS is expected to play an important role in connecting capital and computing power, continue to create greater value, and push the data center industry to a new stage of development.