First time data center issuer taps booming infrastructure market

The ‘new infrastructure’ market has gained prominence in the past few years, bolstered by investment firms’ growing appetite for asset classes related to the digital economy. New infrastructure deals are also one of the few esoteric asset classes that avoided a steep issuance decline during the pandemic because data centres and wireless towers saw no dip in demand.

“You are going to see more financing in what I call ‘new infrastructure’ deals, which includes data centres, cell towers and related asset fibre and distribution centres,” said a securitization managing director at a large investment bank. “The data centre deal that Deutsche Bank is bringing is a good example of this trend.”

DataBank 2021-1 is backed by six multi-customer enterprise data centres in various locations, including Kansas City and Minneapolis. The centres are used for power, space and cooling of their data centre equipment for web servers and routers, according to a pre-sale report by Kroll Bond Rating Agency.

KBRA assigned an A- rating to the class ‘A-1’ notes and the ‘A-2’ notes, and a triple-B rating to the ‘B’ notes. The ‘C’ tranche received a BB- rating.

Deutsche Bank is the sole structuring adviser for the transaction.

DataBank is owned by Digital Bridge, an investment management firm that operates under private equity firm Colony Capital. Digital Bridge focuses on the ownership and investment in data centres and wireless towers.

Colony Capital acquired Digital Bridge in 2019 as a part of its effort to expand in digital infrastructure. Of Colony Capital’s $60bn total assets under management, digital infrastructure accounts for $20bn.

Digital Bridge owns ExteNet Systems, Vantage Data Centers and Vertical Bridge, all active ABS issuers that have tapped the market several times already for funding. The firm bought three infrastructure companies in 2020, the highest number of acquisitions it has made so far.

Colony Capital isn’t alone when it comes to ramping up interest in data centres. Many investment firms involved in the ABS sector are voicing enthusiasm for the asset class, citing growth of tech companies and cloud services.

“One area we have been active in is data centres. All of the big tech companies, like the Googles and Microsofts of the world, are in growing need of having data centre capacities closer to where their users are,” said a senior portfolio manager at a New York investment firm. “That’s an area we see demand continuing to grow and we are happy to lend against those types of assets.”