Singapore’s sovereign wealth fund and a Canadian pension are teaming up to invest in a new North America-focused data center company, the groups said Wednesday.
GIC and OPTrust, along with newly-formed private investment firm Mount Elbert Capital Partners, are investing over $800 million in equity in the latter’s data center-focused company, EdgeCore Internet Real Estate. With leverage, the Denver-based EdgeCore plans to invest $2 billion to develop, acquire and operate data centers, with an eye toward long-term leases.
“As a long-term value investor, we believe the secular growth in data consumption and public cloud usage will generate attractive returns in the data center sector,” GIC’s chief investment officer, Lee Kok Sun, said in a statement.
The sovereign wealth fund is EdgeCore’s lead investor, making its commitment through its real estate arm, while OPTrust invested through its private equity and infrastructure platform, PERE understands. The groups declined to disclose their exact stakes in the company.
EdgeCore is run by Tom Ray, who founded data center real estate investment trust CoreSite Realty and served as its chief executive for 15 years until his 2016 retirement. He previously was a managing director at Carlyle, where he sourced North America investments across property types.
Ray founded Mount Elbert last year with four other former CoreSite executives, with the intent to invest in various alternatives companies, and established EdgeCore this year.
Ray’s immediate focus, however, is on putting EdgeCore’s first round of capital to work, with plans to develop assets in six markets initially, including in Mesa, Arizona; Dallas, Texas; and Reno, Nevada. EdgeCore plans to finish developing the first buildings in those markets by the end of 2018.
EdgeCore plans to develop or buy assets and hold them long term, Ray said. GIC, OPTrust and Mount Elbert could commit follow-on capital in the future as investment opportunities arise.
“That’s one of the reasons we were a good fit,” Ray said. “We’re pleased to be with investors who want to fund expansion.”
The investors do not currently have an exit strategy, but Ray said an initial public offering could be one route. He noted that EdgeCore is the largest privately-funded data center platform, with five REITs also operating in the space. Other data center companies with private capital backing include Cologix, recapitalized by Stone Peak Infrastructure in February 2017, PERE’s sister publication, Infrastructure Investor, reported.
OPTrust chief executive Hugh O’Reilly, who oversees a $19.2 billion portfolio, told PERE that EdgeCore is the first direct investment the system has executed in the data center space. He said EdgeCore’s focus on large clients with lengthy leases, such as Microsoft, Amazon and telecommunications companies, fits well with OPTrust’s emphasis on long-term income generation.
“When you think about the modern workforce, it’s a workforce that uses intellectual skills and tools,” he said. “These data centers are essentially the factories of 50 years ago. We’re now in the process of intellectual production.”
A spokeswoman for GIC, which manages over $100 billion overall, declined to comment beyond Wednesday’s statement.