Gaw Capital Sets Up Mainland Data Centre JV to Launch New Fund

Gaw Capital Partners has established a new joint venture with mainland data centre developer and operator Centrin Data to acquire, develop and operate hyperscale facilities in China, according to an announcement by the Hong Kong-based investment management firm on Friday.

Gaw’s partnership with the Beijing-based firm forms the basis for a new data centre investment fund unveiled in the same announcement, which will be seeded with a year-old facility built by Centrin in Kunshan, a city just outside of Shanghai in China’s Jiangsu province.

“We see significant opportunities in the IDC sector, which is fast becoming a major theme in China as the country deepens its embrace of advanced technology,” Christina Gaw, Managing Principal and Head of Capital Markets for Gaw Capital Partners, said of in announcing the company’s interest in Internet data centres.

The initiative by Gaw comes as part of a wave of investment into China’s data centres by developers and fund managers, including recent deals by Singapore’s GIC and the UK’s Actis. The growing popularity of cloud computing is expected to drive an average 12 percent growth per year in the Asia Pacific data centre market from 2019 through 2024, according to recent research, with demand already having spiked returns for asset owners.

JV Seeded With Jiangsu Facility

The first asset to be included in the Gaw-Centrin joint venture fund is a 6,400 rack facility in Kunshan’s Huaqiao town, which is currently occupied by Tencent, which moved into the facility around one year ago.

The data centre 40 kilometres west of Shanghai also includes a second phase, which is expected to be completed in the early 2020s, that would accommodate at least 25,600 additional server racks. When finished, the entire facility, which benefits from the latency reduction advantages of a direct link to Shanghai’s “National Level” Internet exchange point would measure 300,000 square metres (3.23 million square feet) by gross floor area.

“High barriers to entry and demand-supply imbalance makes IDCs near tier-1 cities a very scarce asset,” Humbert Pang, Managing Principal and Head of China for Gaw Capital Partners said in the statement. “In China, there is an abundant supply of data centres in relatively remote areas, but most of the demand comes from tier-1 and tier-2 cities along China’s eastern coastal line.”

Privately held Centrin Data, which has been ranked as a National High-Tech Enterprise by the Chinese government, also holds another three data centre projects in its portfolio – one each in Beijing, Wuhan and the city of Yantai in Shandong province. Together the 14-year-old company’s four projects house more than 20,000 operational server racks and Centrin has capacity for another 55,000 racks under construction in its pipeline.

5G and Cloud Computing Help Boost Data Centre Demand

The Gaw-Centrin fund has been established as investors search for opportunities to benefit from the high levels of investment returns that successful data centre projects are generating in China and across the Asia Pacific region.

“We are delighted to be investing in this exceptional investment opportunity, given that China’s total internet traffic growth rate is expected to grow exponentially in the coming years due to the launch of 5G,” Gaw’s Pang noted. Centrin, which is helmed by chairman Yang Jie, may already be well-positioned for the China’s 5G drive after forming a data centre partnership with the country’s telecom champion Huawei in 2015.

The new venture by Gaw comes as the Asia Pacific data centre market is expected to grow to a value of $28 billion by 2024, according to a recent report by Cushman & Wakefield, thanks to a projected compounded annual growth rate of 12 percent across the region.

Less than one month ago London-based fund manager Actis made its own bet on China’s data centre market, investing $180 million to take a majority stake in China-focused data centre specialist Chayora.

Singapore’s sovereign wealth fund GIC has also shown interest in mainland server shed opportunities with the government investor, which is estimated to manage more than $100 billion in assets, forming a joint venture with GDS in August to develop data centres for one of the Beijing-based firm’s existing clients.