Blackstone Digital Infrastructure Trust (NYSE:BXDC) reported second-quarter results following its May initial public offering, while emphasizing that the period did not include real estate operations and was not indicative of its expected performance after capital deployment.
The company raised $2 billion of gross proceeds in its IPO, which President and Chief Executive Officer Nick Pell described as the largest blind-pool REIT IPO in history. As of June 30, the proceeds were held primarily in cash and cash equivalents while the company pursued acquisitions of stabilized data centers.
Financial Position and Fee Structure
Chief Financial Officer Tony Marone said the company generated $9.3 million in interest income from IPO proceeds during the quarter. BXDC incurred $800,000 of interest expense associated with fees on its revolving credit facility and $1.4 million of general and administrative expenses, including $535,000 of IPO and formation costs.
Marone noted that GAAP net income per share was calculated using a weighted-average share count of 50 million shares, while FFO and AFFO per-share figures used an adjusted count of 99 million shares reflecting the period after the IPO closed.
The company ended the quarter with $2 billion of total assets, effectively all in cash and cash equivalents, and no balance-sheet debt. BXDC said it expects to target 40% leverage over time through asset-level and corporate debt financing. It also had $1 billion of unused capacity under its revolving credit facility.
BXDC is externally advised by Blackstone, which, along with its employees, owns 11% of BXDC shares, according to Marone. Management and incentive fees are tied to BXDC stock performance, he said. Base and incentive management fees have been waived for the six months following the IPO, roughly aligning with the company’s expected deployment period.
Focus on Stabilized Hyperscale Assets
Pell said BXDC’s strategy is to acquire recently built, income-producing data centers in tier-one markets that are fully leased to investment-grade hyperscale customers. The company intends to avoid development, power and entitlement risk by focusing on stabilized assets with long-term leases.
Management cited continued tight supply conditions in U.S. data center markets. Pell said U.S. data center vacancy reached approximately 1% in the first quarter, while vacancy in BXDC’s target markets was 0.4%. He also said U.S. rent growth had increased by more than 100% from 2021 levels.
The company expects hyperscaler capital expenditures from the five largest companies to exceed $800 billion this year and said it anticipates roughly $3 trillion of spending over the next five years. Pell said those capital needs could create opportunities for BXDC to provide capital solutions, including potential sale-leaseback transactions.
Deployment Pipeline and Market Conditions
BXDC said it is actively engaged with third parties on potential initial acquisitions and has a pipeline that management believes provides confidence in near-term deployment. Pell said the company has more opportunities than capital available at present and is prioritizing assets that can begin paying rent upon closing.
Management said it is evaluating forward transactions involving data centers under development, but Pell said the company remains focused on deploying IPO proceeds within its stated acquisition criteria. The company did not announce any completed acquisitions on the call.
Chief Investment Officer Mike Forman said growing community opposition to new development has not removed the incentive for developers to recycle capital. He pointed to rising development costs, including land, power commitments and construction, as factors supporting asset sales. Forman said U.S. data-center leasing could exceed 20 gigawatts this year, compared with 13 gigawatts last year.
On transaction pricing, Pell referenced nearly $30 billion of recent comparable transactions priced at low- to mid-6% capitalization rates. Forman said it was too early to determine whether recent credit-market volatility had materially affected pricing, though he said volatility and uncertainty could influence counterparties’ decisions around timing and exit alternatives.
Management also said BXDC is agnostic regarding the specific artificial-intelligence workloads performed in its facilities, including training versus inference. Pell said the company’s investment thesis centers on owning infrastructure supporting expanding demand for computing capacity rather than predicting which technology models will prevail.
About Blackstone Digital Infrastructure Trust (NYSE:BXDC)
Blackstone Digital Infrastructure Trust Inc is a real estate company in the Data Center REITs industry.
