CPPIB to Invest $350M in Data Centres with Keppel’s Alpha Investment Partners

Tapping into the burgeoning demand for data storage, the Canada Pension Plan Investment Board (CPPIB) is partnering with Singaporean conglomerate Keppel Group to invest $350 million into data centres, with the option to invest a further $150 million.

The commitment by Canada’s largest pension fund is being made as a sidecar to the Singaporean group’s Alpha Data Centre Fund (ADCF) and brings the total amount raised by Keppel for data centres up to $1 billion — double the fund’s original target of $500 million.

In making the investment, CPPIB is teaming up with Keppel’s real estate private equity unit, Alpha Investment Partners, and Keppel Data Centres Holdings to capitalise on the growing need for purpose-built data handling facilities.

“The continued strong growth in data requirements globally has driven demand for quality data centre space, particularly in the Asia-Pacific region where digital infrastructure is relatively under-developed,” commented Jimmy Phua, CPPIB’s head of real estate investments for Asia in a statement. “By investing alongside the Alpha Data Centre Fund, CPPIB is able to gain exposure into this critical sector.”

Keppel Grows Its Data Centre Business

With the CPPIB commitment in hand, Keppel now says it will have as much as $2.3 billion in data centres assets under management once this latest round of investment is implemented and fully leveraged.

Launched by Alpha Investment Partners in July 2016, ADCF collaborates with Keppel Data Centres to secure greenfield and brownfield data centre assets in Asia Pacific and Europe. The data centre unit is a 70-30 joint venture between Keppel Telecommunications & Transportation and Keppel Land, and now has over a decade of experience building and managing data storage facilities.

Together with assets owned through the group’s Singapore-listed Keppel DC REIT, logistics and data centre specialist Keppel T&T has a total portfolio of 18 data centre properties in Asia and Europe, including projects in Singapore, Australia, Malaysia, Hong Kong, Ireland, the Netherlands, Britain and Germany.

ADCF made its first acquisition last December by buying a 60 percent stake in a two-storey data centre in Frankfurt, Germany. This past July, the vehicle picked up a 70 percent interest in Keppel DC Singapore 4, a carrier-neutral data centre with a gross floor area of 182,000 square feet (16,908 square metres).

CCPIB Steps Up Exposure to Asia, Niche Assets

Toronto-based CPPIB is a major buyer of alternative assets globally, with an Asian private equity portfolio that grew by nearly a quarter to $9.9 billion in the 12-month period through March. The firm, which manages the C$326.5 billion ($251.5 billion) Canada Pension Plan, has taken major bets on Asian real estate, recently splashing out on opportunities from Chinese shopping malls and Indian warehouses to logistics and distressed debt in Japan.

Through the tie-up with Keppel, CPPIB is joining other institutional investors who have developed a taste for data centre properties. In March, the Public Sector Pension Investment Board (PSP Investments) – another Canadian pension heavyweight – linked up with a group including US-based TIAA Investments to purchase California’s Vantage Data Centres for an undisclosed amount.

Surging internet, mobile and cloud computing use are fuelling interest in data centres as a real estate asset class. Data consumption in Asia Pacific is projected to grow by 30 to 60 percent per year between 2015 and 2020, according to a study by PwC released at the start of this year. The region’s data centre services market is expected to grow by 27 percent per annum from $12 billion in 2016, surpassing Europe’s by 2021.