Global investors are pumping billions of dollars into the data center industry, creating a historic deluge of capital. Recent announcements by huge infrastructure investors and sovereign wealth funds are a leading indicator of more new data center construction projects.
The surge in investment reflects the rise of a global economy powered by digital infrastructure, a trend that has been accelerated by the COVID-19 pandemic and the shift to Internet delivery platforms to support online learning, entertainment, and distributed work.
Much of this capital will accelerate the global growth of data centers and cloud computing, supporting demand for digital infrastructure beyond the mature markets in the United States and Europe. Recent announcements have a distinctly international flavor, with funds from Sweden, Japan and Singapore backing experienced data center operators and executives.
EQT and EdgeConnex
EQT Infrastructure will make additional investment in EdgeConneX, the data center platform that EQT acquired last year using its Infrastructure IV Fund. EQT will effectively double its investment in EdgeConneX by using its new EQT Infrastructure Fund V to bring in fresh capital, leaving the two funds with equal ownership stakes in the company.
While details of the investment were not itemized, the EQT Infrastructure V fund has already raised $12 billion, suggesting that its backing could mean billions of dollars to support EdgeConneX and its program to build new data centers and acquire assets and operators.
EdgeConneX has been a leading player in edge computing, building data centers at key network “pain points” closer to users to improve performance – solving the “Netflix problem” for network operators. The company’s streamlined construction methodology has helped the company build a healthy business with hyperscale operators that covet accelerated speed-to-market.
Since its acquisition, EdgeConneX has announced plans to expand into India, acquired an Israeli company that develops underground data centers, and accelerated its regional buildouts in the U.S.
EQT said that additional growth and development opportunities have been identified for EdgeConneX, “such as winning additional customer contracts, expanding the business’ footprint through a proactive build approach in key markets and pursuing accretive M&A. EQT Infrastructure V’s participation will help to capture these opportunities and secure support and execution of EdgeConneX’s full potential plan that was developed over the last year.”
PAG Real Estate Forms Digital Infrastructure Firm
PAG Real Estate, a leading Asia-focused private investment manager, has tapped data center industry veteran Kris Kumar to launch a regional digital infrastructure platform that may invest up to $10 billion in the sector.
PAG Real Estate has invested more than $33 billion in Asia, including $2 billion in data center and telecom holdings. The new company will focus on colocation, cloud, hyperscale and enterprise data centers as well as network and fiber assets in the Asia-Pacific region. PAG says it has “well-laid plans to invest US$10 billion over the short to medium term.”
Kumar led Asia-Pacific operations for Digital Realty and was the founder and CEO of Bridge Data Centers, an Asia-focused platform that merged with ChinData. Kumar recently retired, but is now back in builder mode.
“With PAG’s entrepreneurial approach, decades of experience, superior investment track record and ready access to a competitive cost of capital, my perennial enthusiasm for the sector quickly resurfaced, to lift me out of my year-long retirement,” said Kumar.
“I am looking forward to helping build a platform company on the strong foundation of an already-substantive investment by PAG in the sector over the last four years,” said Kumar. “I strongly believe in our vision of becoming a diligent, customer-focused, and profitable digital infrastructure investor/operator in the region. We are assembling a strong team with a diverse skill set and best-in-class investment and operational experience, to execute this vision.”
“Kris is an icon in the digital infrastructure industry, and we are very excited to work with him to create this platform company that will serve the infrastructure needs of this new digital era that we live in,” said PAG President Jon-Paul Toppino. “With his experience and PAG’s expertise in development and investment, we are looking forward to building a robust platform that will stand the test of time.”
Mapletree Acquires Sila Portfolio
Singapore-based Mapletree Industrial Trust has completed its acquisition of a portfolio of 29 U.S. data centers from Sila Industrial Trust, the successor to Carter-Validus REIT. Mapletree paid $1.32 billion for the portfolio in a deal that completes Sila’s divestment of its data center holdings.
The transaction is the second between the parties. In 2017, Mapletree paid $750 million to buy a 14-property data center portfolio from Carter Validus. The 2021 acquisition provides Mapletree with a presence in the Chicago, Los Angeles and Houston markets. All told, the 29 sites span 3.3 million square feet.
“This portfolio acquisition will enable us to scale up our data center presence significantly and diversify our footprint across key markets in the United States,” said Tham Kuo Wei, Chief Executive Officer of Mapletree.
“Data centers remain resilient with attractive growth opportunities, which are underpinned by the acceleration of digitalization, cloud adoption and e-commerce during the pandemic..” Wei added. “The new portfolio will augment MIT’s portfolio with the increased freehold land component and long leases with embedded rental growth.”
Sila realized a gain of about $350 million on the sale.
“The sale of the data center portfolio represents a substantial gain for the Company and firmly positions Sila Realty Trust, Inc. as a pure-play healthcare REIT,” said Michael Seton, Chief Executive Officer and President of Sila.