Gaw Closes on $1.3B for ADIA-Backed China Data Centre Fund

On Monday, Hong Kong-based Gaw Capital Partners announced it had closed on $1.3 billion in equity for its first data centre fund just ten months after launching the mainland China-focused platform in November 2019.

In a statement, the real estate private equity firm revealed that the Abu Dhabi Investment Authority (ADIA) is the largest backer of the IDC venture, with other global institutional investors said to also have contributed to the new vehicle.

Gaw aims to use the fresh funding to invest in a portfolio of server facilities in China, after the fund manager unveiled a joint venture with Beijing-based data centre operator Centrin Data to acquire, develop and operate hyperscale facilities on the mainland at the same time that it formally launched the investment vehicle last year.

Cloud, 5G Creating Demand

The new fund is joining a rush of capital into data centres around Asia Pacific as growing use of cloud services and the dawn of 5G mobile data networks expand what had previously been a niche asset class.

In its statement Gaw indicated that its joint venture with Centrin had set it up to compete in the increasingly crowded field.

“We have seen good results thanks to our operating partners’ strong execution capabilities,” said Humbert Pang, managing principal and head of China for Gaw. “Amid the backdrop of pandemic and the rapid adoption of 5G in China, there is a strong demand for data processing services due to the increasing use of data because of the social distancing measures.”

When Gaw set up the joint venture with Centrin in November it had seeded the new platform with a 6,400 rack facility in the city of Kunshan — just west of Shanghai — with plans to add additional properties to the portfolio. At the time, Centrin had three additional projects — one each in Beijing, Wuhan and the Shandong province city of Yantai, in addition to a second phase to its Kunshan facility.

China Market Gets Major Attention

Since Gaw’s mainland platform was announced last year, Blackstone unveiled its own $150 million investment in Nasdaq-listed data centre platform Vianet in July and Bain Capital was said earlier this month to be preparing for a $400 million IPO as early as this month for Chindata, a hyperscale facility operator which it bought out last year.

The world’s top fund managers are pursuing their data centre deals after China’s market for server facilities expanded at a compounded annual rate 37 percent from 2010 to 2018 — double the global average to reach RMB 127.7 billion in value.

That growth rate has driven the development of new projects in addition to the platform level deal, with Beijing-based GDS in July setting up a new investment vehicle with state-backed investment firm CITIC to invest in a RMB 2.6 billion ($371 million) server facility in the capital’s Tongzhou district.

During that same month, Singapore’s Keppel Group said that it would invest RMB 1.5 billion to develop its first data centre in mainland China through the Alpha Data Centre Fund operated by its Keppel Capital unit.

Expanding Beyond the Mainland

With its $1.3 billion ready for deployment, and competing data centre platforms rapidly spreading across the region, Gaw Capital is ready to expand its new venture beyond mainland China.

“These commitments we have received are a strong vote of confidence in Gaw Capital’s approach to IDC assets, which is a focused sector for us, and we have further plans to grow into other Asia regional markets,” said Christina Gaw, managing principal and head of capital markets for the family-headed firm.

The company did not specify what other markets around the region it may be targeting for future projects.

Competing for APAC Data Dominance

Pang in his comments noted that with more of life in Asia happening online, data centres near China’s major cities are increasingly prized for their stable rental income, and many of Gaw’s competitors are now targeting similar opportunities regionwide.

US private equity fund Stonepeak Infrastructure Partners late last month announced that it had joined hands with a group of former senior executives from data centre operator Equinix to launch a $1 billion vehicle which had already secured a pair of Japanese server facilities.

Bain’s Chindata platform has also gone regional, with the US private equity firm having lasty merged its mainland acquisition with a Southeast Asian platform that it had acquired in 2017 which already had projects established in Malaysia and more data centres on the way in India.

Warburg Pincus, which last year scored Hong Kong’s largest IPO when logistics platform ESR listed at a $1.6 billion valuation, set up its own APAC data centre play in 2017 when it invested $300 million to help establish Princeton Digital Group in Singapore. The US private equity firm then expanded into China with a $500 million investment last year.

The APAC data centre market is predicted to grow 12 percent over the next four years to to reach a value of $28 billion by 2024, according to a recent report from Cushman & Wakefield.