Colony corrals $1.4bn in first close for RE infra fund

The investment manager is teaming up with an infrastructure firm to raise up to $3bn for the vehicle.

Colony NorthStar has corralled $1.4 billion in a first close for its debut digital real estate infrastructure fund, the firm said in its fourth-quarter earnings results Thursday.

The Los Angeles-based real estate investment trust is working with Digital Bridge, an Boca Raton, Florida-based infrastructure company founded in 2013. The partners are seeking to raise up to $3 billion for the fund, according to a report last year in The Wall Street Journal.

The vehicle will invest in data centers and cell towers, Richard Saltzman, Colony NorthStar’s chief executive, said on Thursday’s earnings call. He did not specify the geographic focus of the fund. The firm committed about $117 million to the fund through its subsidiaries.

A spokeswoman for Colony NorthStar declined to comment, and Digital Bridge could not be reached for comment.

As part of the first close, Colony NorthStar will transfer its interest in Andean Tower Partners, a South American cell tower owner and operator, to the fund. In October, the investment manager and Digital Bridge invested $200 million in ATP “for continued digital real estate infrastructure investment in the region,” according to Colony NorthStar’s third-quarter earnings report.

The fund could include a retail capital sleeve, PERE previously reported.

“Just as we jump generationally from old technologies of cable wired underground to your phone in your pocket, the next wave of investment in that kind of infrastructure will be key,” Colony NorthStar chairman Tom Barrack said in a Bloomberg TV interview last year.

Overall, Colony raised about $280 million in the fourth quarter from institutional and retail investors across its strategies, achieving its annual target of $2 billion. In 2017, the firm invested $2.8 billion total, including $1 billion deployed by its various funds.

The firm’s assets under management dropped to $43 billion as of December 31, down from $56 billion at the end of 2016, following the sale of the real assets consultancy The Townsend Group to Aon Hewitt, according to the earnings results.

Other institutional capital commitments to the strategy include the recent formation of EdgeCore Internet Real Estate. The North America data center manager launched its business last month, backed by Singaporean sovereign wealth fund GIC and Canadian pension OPTrust.

In 2012, San Francisco-based GI Partners formed a $500 million separate account with the California Public Employees’ Retirement System to invest in technology-related real estate, including data centers. The California Teachers’ Retirement System also has a $500 million separate account with the private equity firm to invest in the strategy.