From GDS Holdings Ltd. Sponsored ADR Class A (GDS.US) perspective on REITs: Asset Securitization is reshaping the landscape of the data center industry.

On the road to asset securitization, GDS Holdings Ltd. Sponsored ADR Class A (GDS.US) has taken another crucial step. Information from the Shanghai Stock Exchange official website shows that on March 26th, the Southern GDS Holdings Ltd. Sponsored ADR Class A Center Closed-End Infrastructure Securities Investment Fund (hereinafter referred to as "Southern GDS Holdings Ltd. Sponsored ADR Class A Center REIT") with GDS Holdings Ltd. Sponsored ADR Class A as the original equity holder has been "accepted". The fund started the application process on March 25th and was accepted by the Shanghai Stock Exchange just 1 day later. As one of the first batch of data center public REITs in the market, the Southern GDS Holdings Ltd. Sponsored ADR Class A Center REIT, once disclosed, quickly attracted widespread market attention. In early March of this year, GDS Holdings Ltd. Sponsored ADR Class A successfully issued China's first data center asset-backed securities (ABS), considered as the first private placement REIT in the IDC industry by the market. Less than a month later, the declaration of this public REIT further enhanced GDS Holdings Ltd. Sponsored ADR Class A's first-mover advantage in capital-supported new infrastructure. Industry insiders told GMTEight that the launch of the Southern GDS Holdings Ltd. Sponsored ADR Class A Center REIT is a milestone for the industry. "Data center REITs combine 'technology + real estate' attributes, with cash flow being more stable than traditional commercial real estate. The valuation system is expected to move closer to growth stocks. In a low-interest rate environment, its relatively stable dividend mechanism has strong appeal to insurance funds, bank wealth management, and other investors." Constructing REITs foundation with scarce and high-quality assets GMTEight learned that the Southern GDS Holdings Ltd. Sponsored ADR Class A Center REIT adopts a dual-layer structure of "public funds + infrastructure asset-backed securities," with over 80% of assets invested in underlying infrastructure asset-backed securities, holding the full equity of the Kunshan Guojin Data Cloud Computing Data Center project (referred to as the "Guojin Data Center") through specialized operations to generate stable cash flows from cabinet hosting service fees. The product is managed by Southern Fund as the fund manager, China Merchants Bank as the fund custodian, and Huatai United Securities as the financial advisor. The core asset of the fund is the Guojin Data Center, valued at 2.195 billion RMB as of September 30, 2024 (valuation subject to final regulatory approval). Based on this valuation as of that date, the fund is planned to raise 2.265 billion RMB (valuation subject to final regulatory approval). The high valuation of the Guojin Data Center is due to its high-quality and scarce asset characteristics. Located in Huaqiao Town, Kunshan City, Suzhou, Jiangsu Province, the data center covers an area of nearly 20,000 square meters with a building area of 35,400 square meters and equipped with 4,192 cabinets. This region is a core area of data demand in the Yangtze River Delta, a key node in the strategic layout of "Eastern Number, Western Calculate." The economically developed Yangtze River Delta region has industrial clustering and is home to a large number of large enterprises and internet giants, generating demand for data processing and storage. The Guojin Data Center, with its superior geographical location, can respond quickly to customer needs and provide efficient data center services. Additionally, the region has complete network infrastructure and stable energy supply, providing a solid guarantee for the operation of the data center. The REIT prospectus shows that the Guojin Data Center has maintained an average occupancy rate of 100% in the past three years and the most recent period, with a billing rate stable at over 90%, and a hosting service fee collection rate of 100%. It is worth mentioning that in the current global consensus on green development, the Guojin Data Center has a renewable energy utilization rate of 100%, aligning with the global trend of green development and helping companies operate sustainably in the long term while also addressing investors' focus on green environmental projects. Companies' sound operations provide support for asset securitization The high-quality assets of the Guojin Data Center lay a good foundation for GDS Holdings Ltd. Sponsored ADR Class A to carry out the REITs project, while the company's sound operating performance further provides strong support for asset securitization. In 2024, GDS Holdings Ltd. Sponsored ADR Class A achieved a net revenue of 10.322 billion RMB, a year-on-year increase of 5.5%; adjusted EBITDA reached 4.8764 billion RMB, a year-on-year increase of 3%; the adjusted EBITDA margin was 47.2%, and the net profit for the year was 3.304 billion RMB. GDS Holdings Ltd. Sponsored ADR Class A's overseas operating brand, DayOne Data Centers Limited, completed a Series B equity financing on December 31, 2024, with the company diluting its equity interest in DayOne and treating it as an equity investment object, no longer consolidated into the financial statements. Without considering the impact of DayOne's "deconsolidation," the performance of GDS Holdings Ltd. Sponsored ADR Class A for 2024 has exceeded expectations, demonstrating strong internal growth momentum and risk resistance. Looking forward to 2025, GDS Holdings Ltd. Sponsored ADR Class A plans to...The release of AI inference demand and capacity in the Tier1 market is expected to further improve performance.According to GMTEight, GDS Holdings Ltd. Sponsored ADR Class A has established a complete layout in Beijing, Shanghai, Shenzhen, and surrounding cities, with a nearly one gigawatt developable capacity, fully adaptable to AI inference requirements. In the first quarter of 2025, the company has secured 152MW of AI-related orders, expected to be delivered within 6 months. This is the largest single order the company has ever received in China, confirming GDS Holdings Ltd. Sponsored ADR Class A's technological advantage in high-power intelligent computing centers. Although the implementation period for large-scale demand is 12-18 months, the explosive demand for AI-driven computing power is a certainty. GDS Holdings Ltd. Sponsored ADR Class A's early layout has solidified its leading position in the AI computing infrastructure market. From a business development perspective, these orders are expected to gradually performance increments in the next 2-3 years, bringing stable income to the company and further enhancing its profitability. Asset securitization catalyzes multi-value release GDS Holdings Ltd. Sponsored ADR Class A, with scarce high-quality assets and solid operational performance, has taken the lead in IDC asset securitization. Favorable macro policies also provide room for imagination for its future development in asset securitization. On February 7th, the China Securities Regulatory Commission issued the "Implementation Opinions on Doing a Good Job in the Financial 'Five Major Articles' in the Capital Market," explicitly proposing to "regularly promote the issuance of new types of infrastructure REITs" and include data centers, 5G base stations, and other new infrastructure projects into the priority support category. GDS Holdings Ltd. Sponsored ADR Class A expressed to GMTEight that in the era of rapid development of the digital economy, they actively respond to the national policy of "encouraging private enterprises to participate in the investment, construction, and application innovation of new infrastructure such as data centers and industrial Internet," actively unlocking their existing assets to use the funds for reinvestment, continue to expand new infrastructure investment and construction in China, and contribute to the development of new productive forces. Financially, the issuance of REITs will bring funds to GDS Holdings Ltd. Sponsored ADR Class A, not only effectively improving the company's cash flow, optimizing operational efficiency without increasing debt, but also enhancing the company's ability to respond to market risks. With the funds raised through REITs, GDS Holdings Ltd. Sponsored ADR Class A can invest in new data center projects, improve their data center layout nationwide, and take advantage of the trend of explosive demand for AI computing power in China to win market dividends ahead of time. It can be said that asset securitization is driving GDS Holdings Ltd. Sponsored ADR Class A to transition from a traditional heavy asset operation model to a "light asset" model. In this transformation process, the company can focus more resources on its core business, generate income through asset monetization and continuous operational management, improve capital operation efficiency, achieve flexible asset allocation, better adapt to market changes, and achieve sustainable development. Conclusion GDS Holdings Ltd. Sponsored ADR Class A has made significant progress in asset value marketization pricing and liquidity enhancement through the issuance of REITs. The company can continuously unlock its existing assets through securitization, build a virtuous cycle of "investment-construction-operation-exit-reinvestment," continually improve its business layout and technological upgrades. This strategic layout not only opens up new growth paths for the company itself but also provides experience for the asset securitization development in China's digital infrastructure industry. In the era of AI and digitalization, with the help of policy winds, GDS Holdings Ltd. Sponsored ADR Class A is expected to play an important role in connecting capital and computing power, continuously creating greater value, and driving the data center industry into a new development stage.