ESR has appointed SDAX as the sole digital assets platform to give smaller investors access to the fund manager’s first-ever $1.5 billion pan-Asia data centre vehicle, SDAX executives told an industry forum on Thursday.
Through that relationship with ESR, which is a major investor in the fintech startup, SDAX is enabling asset managers and accredited individual investors to participate in the private fund by purchasing fractionalised digital securities through its blockchain platform, the Singapore-based firm’s chief executive said in a live interview held as part of Mingtiandi’s APAC Data Centre Forum 2022.
“Most of these funds are never widely available to the broader base of investors,” SDAX chief executive officer Raymond Poh said during the forum, which was sponsored by Yardi. “In this [ESR] data centre fund, we are excited about it because… demand for data centres is basically skyrocketing and the supply is limited for various reasons.”
The ESR fund had already over booked over $1 billion in commitments in July, with SDAX helping to raise additional capital for the venture, the company’s senior relationship manager for data centre coverage Jamie Chua said in the interview.
The SDAX platform allows retail investors like family offices, high net worth individuals and smaller institutions to participate in strategies like ESR’s inaugural data centre-focused vehicle at a lower investment threshold than is traditionally possible in private real asset funds, allowing sophisticated individuals and entities to access the higher levels of return commonly available through such vehicles, Poh and Chua explained.
For its first closing in July, ESR raised more than two-thirds of the $1.5 billion hard cap for Data Centre Fund 1 from global institutional investors, including sovereign wealth and pension funds.
Formed from the merger of Digiassets Exchange Singapore and Minterest Holdings, SDAX has ESR as among its shareholders after the Warburg Pincus-backed industrial specialist took over ARA Asset Management last year. ARA and its co-founder, John Lim, previously held a majority stake in Minterest.
Poh noted that investing in the development stage of projects, like the assets lodged in ESR’s vehicle, provides the opportunity for higher returns than are available through the typical REIT strategy of harvesting rental income from stabilised properties.
With asset values rising quickly those REIT yields are coming under further pressure as fund managers struggle to find stabilised assets available at prices that still provide upside for the buyer.
“As we look at compressing returns, the private market is a space to be in,” the former JP Morgan executive added.
Having raised over $300 million on behalf of fund managers including ARA, Chua is bullish on data centre investments generating “good returns” for retail investors as the market fundamentals in Asia set up the region’s digital infrastructure market to provide some of the world’s strongest returns.
“It’s the fastest growing region in terms of mobile data, internet usage, ecommerce, and Web3 technologies including fintech firms like ours,” Chua said. “Many Asian markets, especially Southeast Asian, they’re growing but it’s still very underserved in terms of Internet penetration so being able to tap into these markets, it’s going to bring about significant growth and that’s where we see a lot of potential for investment.”
More Than Server Rooms
SDAX was relaunched in July to provide a digital asset exchange platform for tokenization and trading of asset-backed digital securities.
“The tokenization technology is a simple representation vehicle of the asset and we are using technology to provide this process to make it a lot more efficient and accessible for this new liquidity pool of sophisticated investors,” Poh said. “What we want to do at the end of the day is to reduce the multiple admin costs, to reduce the distribution costs and also to get it out to market as quickly as possible.”
Investors looking to exit a strategy prior to maturity, including backers of the ESR data centre fund, can also trade tokens purchased via the platform in its secondary marketplace. Chua expects trading activity to increase as the pool of participants grows.
Aside from the data centre sector, SDAX’s platform also provides access to other segments of the real estate market, including office buildings and shophouses, Australian commercial and residential assets, properties in Japan – especially in the hospitality segment, as well as strategies related to ESG.
PDG’s Salgame Up Next
Following today’s interview with SDAX’s leadership, Mingtiandi’s APAC Data Centre Forum continue on Tuesday, 13 September, as Princeton Digital Group chairman and chief executive Rangu Salgame speaks with Mingtiandi’s Michael Cole to provide an update on the pan-Asia hyperscale platform’s continuing expansion after raising $505 billion in a funding round which closed in February of this year.
The forum returns the next day, on Wednesday, 14 September as Mingtiandi welcomes a panel of hyperscale experts from Logos, Cushman & Wakefield and Baker McKenzie to discuss opportunities in Asia Pacific’s hyperscale sector, as well as the challenges facing competitors in the fast-growing segment.
The Wednesday panel features Paul Dwyer, head of data centres for LOGOS; Cushman & Wakefield managing director Vivek Dahiya, who leads data centre advisory in the region for the consulting firm and Baker McKenzie partner Edwin Wong, who advises on fund investments in the data centre industry.
Next Thursday, 15 September, MTD TV will focus on the Greater China market with a panel led by Joelin Ma, director for non-listed real estate in Asia with APG Asset Management. Ma will be joined by Zhang Hong, head of private equity at law firm Baker McKenzie FenXun and Johnny Shao, managing director for investments at Gaw Capital.
The last two panels on the month-long series comprise a 20 September session on the Japanese and Korean data centre market with speakers from ESR, Nuveen, JLL and EdgeConneX, and a final talk on sustainable data centre innovation on 23 September featuring leaders from SC Zeus Data Centers, Ivanhoé Cambridge, SDAX and Cushman & Wakefield.