APAC data centres are hot asset after flurry of institution-led deals
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Data centres are enjoying their moment in the sun with a surge in deal-making and fundraising, which are expected to help to expand the investment universe in Asia Pacific for institutional investors.
“We’re targeting countries where we can have an impact and broader group presence – Australia, New Zealand and South Korea – and will thoughtfully expand from here,” Udhay Mathialagan, managing partner in Brookfield’s Infrastructure Group and CEO of Brookfield’s global data centre group told AsianInvestor.
Brookfield announced in December 2023 that it had closed the world’s largest closed-ended private infrastructure fund, BIF V, with $30 billion (of which $10 billion has already been deployed), mainly from public and private pension plans, sovereign wealth funds, financial institutions, endowments, foundations and family offices.
Brookfield
While Mathialagan declined to say how much of the new fund would flow into APAC, he emphasised the importance of the region to the group, where Brookfield’s existing exposure in the region comes via DCI Data Centres, which the manager acquired in 2019.
Mathialagan also pointed to the growing Indian market, to which the manager is exposed through to which the fund is exposed by DCI Data Centers, and Digital Connexion, the company formed in July 2023 with India's Reliance industries and Digital Realty.
APAC BENEFIT
A proxy for the interest in Asia could come from PGIM Real Estate, the real estate investment arm of US insurer Prudential Financial, which raised about $1 billion from a $2 billion target for its Global Data Centre Fund, unveiled in May, according to a source familiar with the launch and who requested anonymity.
“They anticipate that around somewhere between 50% and 75% will be deployed to the US, with most of the remainder in Tier 1 APAC markets like Japan, South Korea, Australia, and possibly a minor allocation to Europe,” the source told AsianInvestor.
Most recently, the region saw its largest ever data centre deal: On September 4, when Canada Pension Plan Investment Board and a consortium of Blackstone Funds announced they would acquire AirTrunk, the leading Asia Pacific data centre platform based in Sydney, from Macquarie Asset Management and Canada’s Public Sector Pension Investment Board for $16.5 billion (A$24 billion).
CPP Investments, which acquired 12% of the company, and has offices in Hong Kong, Mumbai, and Sydney, has data centre joint ventures and investments in key hubs in Asia Pacific, including Australia, Hong Kong, Japan, Korea, Malaysia and Singapore.
“This investment represents another milestone in our broader data centre strategy, further enhancing our footprint in the region,” Max Biagosch, senior managing director, global head of real assets and head of Europe for CPP Investments, said at the time.
CPP Investments declined to comment further for this story.
The Airtrunk deal represents more than double the total flows into APAC’s data centre sector in the
AsianInvestor also reported recently that the Global AI Infrastructure Investment Partnership (GAIIP), a new data centre and artificial intelligence (AI) fund launched in September by Abu Dhabi sovereign fund Mubadala, BlackRock, Global Infrastructure Partners and Microsoft, could provide vital new opportunities for Asia Pacific institutional investors.
NEW OPPORTUNITIES
“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 recently.
CBRE Singapore
In September 2023, Australia’s largest super fund, AustralianSuper, made its first data centre allocation, when the fund signed a $2.5 billion deal with DigitalBridge Group, a digital infrastructure manager, to acquire a significant minority stake in Vantage EMEA.
Vantage EMEA was one of the fastest growing hyperscale data centre platforms in the Europe, Middle East and Africa.
The new flows should help grow the opportunity set for investors frustrated by the fragmented nature and short supply in the region’s market.
“The data center market in Asia is diverse with each country having its unique set of challenges,” 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.
He pointed to the shortage of supply, noting that valuations needed to rise significantly enough to incentivise land owners, developers and power regulators to support further data center development.