Bernstein SocGen Group analyst Madison Rezaei initiates coverage on Blackstone Digital Infrastructure Trust (NYSE: BXDC) with a Outperform rating and a price target of $26.00.

The analyst comments: “BXDC is a first-of-its-kind vehicle intended to acquire newly-built, already-leased, hyperscale-focused data centers in top-tier markets in the U.S. It is externally managed by Blackstone. The company raised $2B in a blind pool IPO on May 14 and has yet to buy its first asset, though we anticipate the company will move quickly, potentially showing progress as early as this quarter.

We think the concept makes sense from a market demand and timing perspective—there is a massive TAM ($90B+), a clear need for developers to sell their stabilized data centers, and not a lot of existing opportunities for public investors to participate in the space beyond DLR and EQIX. With $200B+ invested in data centers since 2018, we also believe Blackstone is a credible execution partner. The major investor pushback on the BXDC concept is on its external management structure.

We have yet to identify an example of a long-term successful, externally-managed REIT, though there are plenty of horror stories. We believe BXDC has assessed its historical precedents, made some smart decisions, and is about the best external manager we could imagine for this setup. That said, the 100bps (tiered) management fee is real and weighs on our valuation.”

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Shares of Blackstone Digital Infrastructure Trust closed at $21.84 yesterday.