Cool Vector – Détails, épisodes et analyse

The private equity firm that created ⁠Digital Realty ⁠sees a "wealth of opportunities" in digital infrastructure, but avoids hyperscaler mega-projects, says Mark Prybutok, a Managing Director at ⁠GI Partners⁠ and Head of the Data Infrastructure strategy.

In 2001, GI Partners made its very first investment as a firm in a portfolio of distressed data centers reeling from the dotcom crash. In 2004, that portfolio was listed publicy as Digital Realty, now the world's largest data-center REIT. 

Today, GI Partners has $45 billion in assets under management, and oversees three strategies: private equity, real estate and digital infrastructure. In a wide-ranging interview with Cool Vector, Prybutok shares his excitement about investing in a rapidly expanding market, but offers guidance to investors about nuanced differences between business models, locations and commercial strategies. 

Prybutok also describes GI Partners' strategy in digital infrastructure as being more akin to private equity, with a focus on operating businesses, management teams and value-add strategies. 

Among the key takeaways from the interview: 

Digital infrastructure deserves a substantial allocation in the portfolio. As digital giants drive global economic growth, Prybutok argues digital infrastructure should potentially command a larger allocation in institutional portfolios than the modest levels seen today: “If you think about infrastructure as the physical underpinnings of the economy… why shouldn’t it be significantly higher than 20%, 25%?” 

Success in digital infrastructure requires sector nuance. With growing competition from generalist investors, GI Partners differentiates itself through deep sectoral focus and an ability to identify winners in niche sub-markets: “We’re identifying businesses that we in particular think are going to be the winners within a sub-sector of a sub-sector.”

Edge infrastructure is a bigger opportunity than centralized mega-infrastructure. While hyperscaler campuses get headlines, GI sees greater long-term opportunity in edge infrastructure tailored to mid-sized businesses and real-world IT needs: “There’s a massive opportunity, multiples larger in aggregate, than these massive concentrated AI training data centers, but located closer to those end use points.”

Digital infrastructure should be tech-enhancing, not tech-exposed. GI Partners focuses on durable physical infrastructure, steering clear of reliance on rapidly evolving technologies that risk obsolescence: “You want to make sure you’re not getting stuck investing in a generation of technology that is then made obsolete by improvements that happen in the next generation.”

AI and IoT are fueling an urgent need for more infrastructure. From video surveillance to industrial automation, AI’s real-world applications are just beginning, creating vast demand for data centers and networks: “We see real-world examples… where the number of people reviewing and responding to alerts is going down exponentially as the AI improves.”

Follow Cool Vector on LinkedIn: ⁠https://www.linkedin.com/company/cool-vector-media⁠

#datacenters #digitalrealty #digitalinfrastructure #privateequity

The launch of a new data center 'pod' business is being met with surging customer demand, highlighting the need for edge digital infrastructure in remote areas, according to the leadership of Duos Edge AI. 

In an extensive interview with Cool Vector,  Doug Recker, President of Duos Edge AI, and Adrian Goldfarb, CFO of parent company Duos Technologies Group, describe how edge data centers offer an affordable, scalable solution to bring low-latency connectivity to remote regions underserved by traditional infrastructure. “When we drop one of our pods, you’re right around a million dollars," says Recker. "So you can justify the expense and the revenue by deploying these, and the savings to the customer out there justifies the [co-location]."

Other key takeaways from the Duos Edge AI interview on Cool Vector:

Edge pods serve diverse and growing demand—from remote school districts to ranchers using drones and AI—accelerating a trend of localized cloud computing. “They’re now going to drones and AI to manage their cattle," says Recker, of cattle ranchers in remote parts of Texas. "Well, they can’t do all this data and AI without having compute on site.”

Compared to traditional data centers that can take years to build, Duos Edge AI delivers a fully operational edge pod in less than four months.

With revenue potential of up to $400,000 per year, and rapid deployment costs of around $1 million, edge pods deliver attractive ROI within four years. “The expected revenue from that is somewhere between $300,000 and $400,000 per year, which means the return on it is anywhere between two and a half and four years," says Goldfarb.

The explosion of data demand—especially in remote healthcare and education—has transformed edge data centers from speculative infrastructure to essential utility. "The need is there," says Recker. "We’re not trying to invent a product. Now we’re trying to fix a need, which is always better to be on that side.”

Follow Cool Vector on LinkedIn: ⁠https://www.linkedin.com/company/cool-vector-media⁠

Private equity firm ⁠Actis⁠ is building data centers around the world while maintaining strict standards around sustainable energy, water and social impact. And the firm's impact is about to get bigger. Actis and General Atlantic recently merged to create an $87 billion investment platform, with Actis focused on the huge opportunity in sustainable infrastructure, largely in growth markets across Asia, Latin America, Africa and Eastern Europe.

Digital infrastructure is a significant part of the investment mandate for Actis, with 17 offices across the world. The firm draws on its on-the-ground expertise in real estate, renewable energy and infrastructure to tackle the many burgeoning opportunities in data centers, wireless towers and fiber.

In a wide-ranging interview, Thomas Liu and James Magor, Partner and Director, respectively, describe a global build-out of data centers in global growth markets, most of which have not previously offered data center sites to hyperscaler customers. Each market has a very different regulatory regime, but most favor data sovereignty, and are led by governments aware of the developmental benefits that digital infrastructure can bring to their economies.

Driving the development are expansion-minded hyperscaler customers like Amazon and Microsoft, which are locked in a competition for AI dominance around the world. Liu notes these hyperscalers need local partners with insights into local regulations, and the ability to maintain relationships of trust with local communities. For example, Actis has taken a successful digital literacy program from its operations in Nigeria and started using it to engage with communities across Asia.

Liu and Magor discuss Actis' recent investment in Epoch Digital, a diversified data center platform with developments planned in South Korea, Malaysia and Taiwan. Magor says the importance of resilient building techniques was highlighted by a recent Taiwanese typhoon that hit Epoch's construction site there.

Liu explains the benefits of merging with General Atlantic, including an expanded investor base and the ability for Actis to draw on General Atlantic's deep relationships with TMT customers across the world.

Visit the Cool Vector website here: ⁠https://coolvectormedia.com/

Data center real estate investment trusts (REITs), like Equinix and Digital Realty Trust, differ from traditional REITs in their higher operational intensity and reliance on artificial-intelligence tailwinds for growth, says Harold Chen, Director of Commercial Real Estate at Fitch Ratings.

Chen, whose team has assigned investment-grade ratings to Equinix and Digital Realty, says the companies benefit from surging demand related to AI. Of the two, Digital Realty has a higher concentration of hyperscaler customers, defined as big-tech, data-center customers like Microsoft, Mega and Amazon. The upside of hyperscaler concentration is longer-term leases, while the downside is customer concentration and the inability to more frequently reprice rent rates, says Chen, adding data center REITs have a history of only single-digit customer churn. Data centers that cater to co-location customers tend to have shorter leases, he says.

Data-center REITs also differ from traditional REITs in their "significantly higher levels of operational intensity," says Chen. Complexities like power, cooling and interconnectivity make data-center REITs "significantly different beasts."

Chen also discusses with Cool Vector the impact that ESG and sustainability initiatives have on Fitch ratings, and the historic challenge for data center companies to access certain forms of financing, like asset backed securities (ABS).

Visit the Cool Vector website: Cool Vector Media

"I kid you not. . . at least once a week, I've got a conversation going with somebody who sits in digital infrastructure private equity, and they say to me, 'If you know somebody, or a team, that does XYZ in the data center space, let me know. I'd love to meet them, because that is the type of business model that we could put hundreds of millions, if not not billions, into.'"

The amount of private capital available for deployment in digital infrastructure investments is far outpacing the supply of operational talent necessary to put it to work. Patrick Reyes, a Principal at infrastructure-focused executive search firm, ⁠One Search,⁠ says large private equity and infrastructure firms eager to enter the digital infrastructure asset class often have deeply researched ideas about where to invest, but lack the platform company or management team to executive the strategy.

Reyes shares these observations in the Cool Vector episode, "Why Comp is Surging for Digital Infrastructure Investors and Operators."

Cool Vector website: ⁠https://coolvectormedia.com/⁠

Partners Group was already bullish on AI when, in 2022, the firm invested $1.2 billion in EdgeCore Digital Infrastructure. Then the debut of ChatGPT a few weeks later blew to lid off their initial assumptions of growth.

In the post-ChatGPT world, the hyperscaler market served by EdgeCore saw an "explosion of demand for capacity," says Diffendal who, in a wide-ranging interview, explains the criticality of strong management in responding to the unexpectedly strong leasing activity.

Two years later, the growth of EdgeCore Digital Infrastructure was such that "we basically ran out of money," says Diffendal. In September, Partners Group raised another $1.9 billion in capital, much of it in the form of co-investment from limited partners, institutional investors who had many questions about power availability and exit opportunities.

Diffendal also discusses the imperative of keeping the data centers powered to a "five-nines" (99.999%) standard of up-time, to avoid getting financially penalized by "demanding" hyperscaler customers. As investors in data-center hub Northern Virginia, Diffendal describes the general shortage of all forms of labor there, including electricians.

Partners Group's original thesis was that data centers would benefit from the tailwinds of cloud computing, video and AI. Diffendal adds: "I really think we're just at the very beginning of understanding what the commercial implications of AI will be."

Visit the Cool Vector video-podcast website: https://coolvectormedia.com/

A conversation with Omar Jaffrey, founder of digital infrastructure private capital firm ⁠Palistar Capital⁠, which is currently investing from a $1.9 billion fund.

Jaffrey gives a grand tour through the digital infrastructure investment opportunity, in which he says builders of scale will have advantages in winning customers. He cautions that some investors confuse the full stack of technology, services and human capital involved in the telecommunications industry with core infrastructure, the later of which has a history of more consistent performance.

Among other topics, Jaffrey also makes the case for the long-term durability of infrastructure hard assets, comments on the pressures faced by potential sellers of wireless rooftop and tower assets, and explains the many options for revenue streams that owners of many towers can realize.

Cool Vector website: https://coolvectormedia.com/

John Siegel, a Partner at private equity firm Columbia Capital, offers a deep dive into the physical assets necessary to power an AI-driven internet, including the fiber optic cables that connect the growing population of data centers around the world, and the nations jockeying for position to build digital infrastructure hubs.

In a wide-ranging conversation, John shares his views on the demand drivers of information sharing, including not only AI but the massive proliferation of devices that connect to the internet. He details the data center build-out across Asia and explains why governments are so eager to develop hubs like his home base in Northern Virginia.

A long-time telecom investor and "qualified bull," John also shares his analysis of a wave of bankruptcies in the early 2000s (which lost billions for private equity investors) and what lessons these might have for the current digital infrastructure build-out.

About Cool Vector

Cool Vector is a video-podcast created to chart the rise of data centers and the digital infrastructure asset class. On a regular basis, the podcast will convene expert conversations about the investment opportunities and macro themes driving the build-out of digital infrastructure, including private capital dynamics, performance expectations, energy demand, geopolitical influences, sustainability opportunities, development and construction, technology and community impact.

Cool Vector is hosted by financial journalist David Snow, a long-time chronicler of the alternative investment market. This interview should not be considered investment advice or a solicitation to invest, and the views and opinions expressed herein are those of the speakers and do not necessarily reflect the views or positions of any entities they represent.

-

Watch this interview on the Cool Vector YouTube channel: YouTube

Digital infrastructure has a voracious appetite for energy, but the electric utility industry is filled with apprehension and lacks 'muscle memory' to 'build big things,' according to Brian Janous, co-founder of sustainable energy specialist Cloverleaf Infrastructure, as well as the former head of data center energy for Microsoft.

In a wide-ranging interview with Cool Vector, Janous describes how his mandate at Microsoft went from relative obscurity to a top-order concern among the company's leadership. He discusses how data center sites are identified, evaluated and the importance of finding a willing counter-party in the local utility.

Janous also discusses the importance of community engagement, the risks of project delays and regulatory lags, the dominace of solar as a form of renewable energy for data centers, and the criticality of long-term power purchase agreements.

About Cool Vector

Cool Vector is a video-podcast created to chart the rise of data centers and the digital infrastructure asset class. On a regular basis, the podcast convenes expert conversations about the investment opportunities and macro themes driving the build-out of digital infrastructure, including private capital dynamics, performance expectations, energy demand, geopolitical influences, sustainability opportunities, development and construction, technology and community impact.

Cool Vector is hosted by financial journalist David Snow, a long-time chronicler of the alternative investment market.

Watch Full Episodes of Cool Vector on YouTube and Spotify.

Financial journalist David Snow introduces Cool Vector, a new video-podcast that will chart the rise of data centers and the digital infrastructure asset class.

On a regular basis, Cool Vector will convene expert conversations about the role that institutional investment capital will play in the build-out of digital infrastructure around the world, and focus on the overlapping long-term trends of digitalization, the rise of private capital, changing energy demand, changing land and real estate use, innovation in sustainability, national security, and many other topics.

Full video episodes of Cool Vector will live on the Cool Vector YouTube channel as well as the major podcasting platforms like Spotify. Clips of each episode will be promoted on LinkedIn, Instagram and TikTok.

The Cool Vector video-podcast homepage is here: https://coolvectormedia.com/