CPPIB Investing $319M in Mitsui Fund to Develop Japan Data Centres with Fidelity

Japanese finance group Mitsui has won backing from the Canada Pension Plan Investment Board (CPPIB) to invest in developing hyperscale data centres in Japan as demand for data grows in Asia’s most developed economy.

The $397.4 billion Toronto-based giant has committed C$400 million ($319 million) to the Japanese Data Centre Development Fund, or Mitsui Fund for short, as the partners move to meet the information requirements of Asia’s second-largest economy.

“In Japan, the scarcity of developable sites near major urban areas such as Tokyo and Osaka and intense capital needs have presented further challenges in developing hyperscale data centres,” said Jimmy Phua, managing director and head of APAC real estate at CPPIB. “This investment will help address both the significant demand and constrained supply, providing tenants with high-quality space and service.”

The CPPIB-Mitsui fund has teamed up in a 50:50 joint venture with financial services firm Fidelity to develop and operate server facilities in Japan through the US conglomerate’s Colt Data Centre Services division.

Going Hyperscale on Honshu

Mitsui Fund’s initial projects will be hyperscale developments in the greater Tokyo and Osaka areas. The Fidelity joint venture will initially target 90 megawatts of capacity, including projects in Kyoto and Chiba, with the potential for further growth of the partnership in Japan and elsewhere in Asia Pacific.

Mitsui’s real estate fund management arm will serve as asset manager for the platform, taking responsibility for JV structuring, financing, land sourcing, development support and Japanese customer marketing. Colt will handle development management, customer marketing and on-site operations at the projects.

UK-based Colt has 50MW of built capacity in Japan. Last year the company pre-sold 94 percent of capacity before the launch of the 27MW Inzai Three facility in Tokyo’s Chiba New Town.

“Japan remains a strategic country of focus for our regional expansion, where the demand for large-scale data centre capacity outstrips supply,” said Colt CEO Niclas Sanfridsson.

Targeting Tokyo

Founded in 1992, Colt already has six data centres established in Japan with the new venture expected to triple the company’s capacity in the country, which is seen as a top target for data centre builders.

A survey published earlier this year by Arcadis ranked Japan as the third most attractive market globally for developing data centres, with the European design and engineering consultancy noting the country’s high rate of mobile broadband penetration and large-scale adoption of digital technologies by business as helping to drive data consumption.

Just last month, Singapore-based Princeton Digital Group announced a $1 billion plan to build a 97MW data centre in Tokyo. In March, US giant Equinix opened its first hyperscale facility in Asia in the Japanese capital.

Back Into Bit Barns

CPPIB’s capital commitment to the Mitsui Fund comes after the Canadian pension manager partnered with Singaporean conglomerate Keppel Group in 2017 to invest $350 million into data centres, with the option to invest a further $150 million.

The commitment by CPPIB was made in 2017 as a sidecar to Keppel’s Alpha Data Centre Fund and brought the total amount raised by Keppel for data centres to $1 billion — double the fund’s original target of $500 million.

Ranked among the 10 largest pension fund managers in the world, CPPIB had assets under management of C$497.2 billion as of 31 March 2021.