T5 and QuadReal Cue Up $2.5B Data Center Investment War Chest

Canadian investor teams up with US data center specialist to build tech-related real estate business

Yevgeniy Sverdlik

April 26, 2019

2 Min Read
T5 Data Centers control room
Control room at a T5 data centerT5 Data Centers

Data center developers and investors expect nothing but a bright future ahead, Intel’s data center woes be damned.

Canadian real estate investor and developer QuadReal Property Group and data center specialist T5 Data Centers announced on Friday a plan to invest $2.5 billion in building and buying data centers for hyperscale platforms and more traditional enterprises.

Observing data center companies’ ability to retain steady growth in the face of macro-level market turbulence over many years, institutional investors like QuadReal have been flocking to the sector recently. QuadReal wants to “build a long-term business in tech-related real estate,” Jameson Weber, head of special situations at the investment company, said in a statement.

According to Atlanta-based T5, it has been building large data centers and leasing them out through wholesale deals for 10 years. Its customers are hyperscalers, enterprises, and retail colocation providers.

Considering the enormous amount of money the partners say they have secured, the platform they plan to build would be a major force in the market.

At the upper end of the range, a large data center operator pays roughly $10 million per 1MW of capacity when building a large data center. The per-MW cost varies, and some have claimed to get it as far down as $6.5 million.

Related:Infrastructure Investors Get Hungry for Data Center Deals

Using the higher number, T5 and QuadReal’s $2.5 billion war chest could fund as much as 250MW of new data center capacity. That’s one quarter of all leasable capacity in Northern Virginia, the world’s largest and fastest-growing data center market, which crossed the 1-gigawatt threshold just recently, according to this week’s announcement by the commercial real estate giant CBRE.

QuadReal and T5 said they plan to invest this money in both building and buying data centers. So, if they spend it as planned, they stand to amass even more capacity, since in most cases buying existing facilities costs less than building new ones.

This isn’t the first big partnership T5 has struck with a big real estate investor. One of its backers, IPI Data Center Partners Management, is a joint venture between real estate investor Iron Point Partners and Iconiq Capital, a wealth management firm whose clients include some of Silicon Valley’s richest players. IPI was formed and made its first data center play – an investment in T5 – in 2016.

Iron Point has reportedly considered selling some or all of its stake in T5 to the Australian investment giant Macquarie Group in 2018. But earlier this year, IPI combined some T5 assets and three data centers built by Infomart (which it bought in 2018) to launch a new data center operator called Stack Infrastructure.

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