Giant Microsoft-backed data centre fund to open new avenues for APAC institutions
The Global AI Infrastructure Investment Partnership (GAIIP), a new data centre and artificial intelligence (AI) fund launched in September, could provide vital new opportunities for Asia Pacific institutional investors.
“The [new fund] provides an additional avenue for investors to enter the space. In the past, they have been short of investing [opportunities] in site-specific projects. The challenge for investors has been finding a way into the asset class,” Tom Fillmore, executive director, data centres, capital markets, Asia Pacific at CBRE in Singapore, told AsianInvestor.
CBRE Singapore
The fund aims to unlock up to $100 billion of investment in data centres and other AI infrastructure opportunities.
The fund is a joint venture between MGX, the recently launched artificial intelligence-related investment vehicle of Abu Dhabi sovereign fund Mubadala, alongside BlackRock, Global Infrastructure Partners (GIP) and Microsoft.
It aims to raise $30 billion in private equity from investors, asset owners, and corporates, and an additional $70 billion in debt financing, and will focus on opportunities in the US.
Bob Tan, executive director, capital markets, Asia Pacific at JLL in Singapore told AsianInvestor that the new fund represented an important new allocation opportunity for investors.
“We see it challenging investors to get hold of data centre deals, who must partner more with developers and take on more risk. The new BlackRock fund should in theory give opportunities for investors to get into large deals, assuming they’re able to get an allocation to the fund,” he said.
ALLOCATION OPPORTUNITIES
Tan added the new fund would appeal particularly to APAC investors with smaller allocations or those at an earlier stage of their allocation process, compared with major private equity funds who pursue stakes in data centre platforms.
JLL APAC
“Larger private equity fund managers would need to work out with their own LPs [limited partners] the differences and why it makes sense to also allocate money into this new fund. Other investors whom have only taken passive positions into platforms or perhaps who are geographically light in US would have a stronger business case,” he said.
Spencer Park, special counsel in the Seoul office of Milbank LLP, whose clients include a number of Korean institutional investors and asset managers, told AsianInvestor that the fund was good news for APAC investors, for whom regional opportunities are rare and increasingly expensive.
“Because of the proposed size of the fund, it may have an advantage in offering more generous pricing depending on its return hurdles,” he said.
The number of Asia Pacific institutions that are large enough to secure allocations to the new fund remains unclear.
Milbank
“Some of the funds that we know that have data centres in their crosshairs in Asia Pacific have minimum ticket sizes of $100 million to $250 million,” a source familiar with the launch and requested anonymity told AsianInvestor.
“Most likely, I would have thought that, at a minimum, you would need to commit $100 million to enter the fund,” said Fillmore.
That could exclude many investors in the region, noted Park.
“If heavily subscribed, allocations will be limited to bigger investors with a track record. Historically in Korea, the less-known investors may not have the opportunity to invest as they have struggled in the past to get allocation – although that has improved significantly in the past several years,” he said.
INVESTMENT IMPACT
The involvement of one of the leading technology companies in a fund of this type marks an important departure for the sector, according to the anonymous industry source.
“The developer-operator of the new data centres built by the fund is likely to be exclusively Microsoft. [Microsoft] foresees an explosion of necessary capacity, and instead of dealing with 50 different third-party operators globally, they prefer to have this programmatic relationship with one major partnership, centrally controlled by this fund,” they said.
While the new fund could finance projects in this part of the world, this would likely not materialise for some years, the source added.
“If only 10% came to APAC, that would be a huge sum. However, this is likely to be protracted and drawn out over many years, given the incremental, phased nature of data centre deployments,” the souce said.