Investment bank Keefe, Bruyette & Woods is maintaining its "Outperform" rating and $138 price target for Hut 8, following the AI infrastructure developers fully commercialized lease announcement a its one-gigawatt Beacon Point AI data center campus through a second 15-year lease covering 352 MW of IT capacity.
KBW estimated that only 139 MW of future colocation growth was reflected in Hut 8's $91.45 share price before the announcement, compared with the 352 MW added under the second lease. Hut 8 shares rose about 15% in pre-market trading, the report said.
KBW analyst Stephen Glagola said the tenant appears to have exercised its expansion option shortly after an exclusivity period expired in mid-July. Glagola said the timing prevented competing developers from pursuing the tenant's initial 2028 capacity requirements.
The lease includes a 3% annual rent escalator. KBW estimated first-year stabilized NOI of approximately $1.50 million per net MW and a 15% yield on cost. On a trended basis, those figures rise to $1.86 million per net MW and an 18.6% yield.
Hut 8's contracted AI portfolio now covers 949 MW of IT capacity across Beacon Point and River Bend. The portfolio has $26.6 billion of aggregate base-term contract value and expected average annual NOI exceeding $1.75 billion, according to the company.
The July 20 agreement brings contracted IT capacity at the Nueces County, Texas, campus to 704 MW. The undisclosed, high-investment-grade tenant also holds the first 352 MW lease.
The new lease carries $9.8 billion of base-term contract value, taking the campus total to $19.6 billion. Hut 8 expects Beacon Point to produce average annual net operating income of $1.31 billion after stabilization. Three five-year renewal options under each lease could raise total contract value to $50.2 billion.
Initial campus energization remains scheduled for the first quarter of 2027, while Hut 8 expects to deliver the first Phase 2 data hall in the second quarter of 2028. The second AI facility will use NVIDIA's DSX reference architecture and approximately 500 MW of utility capacity.
Beacon Point has secured its utility interconnection through AEP Texas, but it has not received formal authorization to energize. KBW identified ERCOT's August 7 Batch Zero deadline as the project's next milestone and expects Beacon Point to qualify as Base Load because of its executed lease and advanced development status.
ERCOT's Batch Zero process is used to assess the system-wide reliability implications of large-load interconnection requests that satisfy specified maturity and commitment requirements.
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