Alinda Capital Infrastructure, a closed-end investment trust backed by Alinda Capital Partners, released its prospectus for its potential £350m initial public offering (IPO), whereby the company disclosed details on its digital infrastructure investment strategy, initial pipeline of investment opportunities (which includes a commitment to Alinda Infrastructure Fund IV), and middle-market track record across various Alinda managed funds. This incremental detail closely follows Alinda Capital Infrastructure’s release of its Intention to Float in mid-October 2021.
In terms of timing, Alinda Capital Infrastructure intends to announce the results of it capital raise by November 25th and complete its IPO (i.e., Initial Admission) by November 29th.
Digital Investment Strategy – Alinda Capital Infrastructure
Alinda’s new vehicle will invest primarily in core plus, middle-market infrastructure, with one of its three key sectors of focus being digital. Specifically, within digital, Alinda Capital Infrastructure is targeting wireless infrastructure (towers, small cells & DAS), data centers, and broadband networks (fiber).
Alinda will focus on macro towers and venue-based wireless infrastructure, such as distributed antenna systems (DAS), small cells, and Wi-Fi solutions. Investments will be allocated to upgrade existing assets to 5G standards, as well as to densify coverage, enabling high-speed connectivity. Alinda’s neutral host approach will extend to ‘next generation’ technologies such as small cell towers, software-defined networking (SDN), and fixed wireless access (FWA) antennas.
Alinda targets data centers which have i) developed interconnection ecosystems with hundreds of tenants, ii) wholesale facilities with cloud service providers as long-term, investment-grade anchor tenants, and iii) regional data centers with dominant positioning and a sticky customer base. Specifically, the company notes opportunities to partner with existing operators or invest in platform companies focused on smaller data centers that reduce latency or that allow smaller customers to outsource their data center needs.
Alinda aims to invest in broadband networks with a unique footprint and barriers to entry. Additionally, the firm will seek to deploy success-based capital to upgrade or connect stranded communities, and/or premises. In turn, these investments will alleviate network strain and form a connectivity backbone for 5G services. For example, these networks will connect premises, homes, offices, data centers, and wireless towers.
Infrastructure Pipeline – Digital Highlights
Alinda Capital Infrastructure has identified an infrastructure pipeline of investment opportunities in digital, transport & logistics, and utilities, which comprise a total equity opportunity of $660m (£485m). In terms of size, the firm will target equity investments of up to £200m, in infrastructure assets or companies, with an enterprise value of up to £1bn. Finally, as it relates to digital, Alinda will employ leverage within the following ranges:
- Total Debt-to-Capitalization: 40% to 60%
- Debt-to-EBITDA: 5x to 7x
Below are specific examples of digital infrastructure investments from Alinda Capital Infrastructure’s pipeline.
Alinda Infrastructure Fund IV – LP Commitment
Alinda Capital Infrastructure will commit £150m ($205m) as a limited partner (LP) in Alinda Infrastructure Fund IV, the flagship private equity fund of Alinda Capital Partners. Notably, Alinda Infrastructure Fund IV has set an overall target size of $1.5bn, with a maximum size of $2.5bn. Therefore, Alinda Capital Infrastructure’s commitment will represent ~8% to ~14% of Alinda Infrastructure Fund IV’s total LP commitments.
Alinda Infrastructure Fund IV is targeting a gross IRR of 15% per annum, a gross multiple of invested capital (MOIC) of 1.7x, and an average annual gross cash yield to investors of 7%. Finally, the fund targets investment weightings of 70% North America and 30% Europe, with 1/3rd of its portfolio in digital.
Pipeline – Non-LP Commitment Opportunities
In addition to investing in Alinda Capital Partners’ private equity funds, the firm discloses a further five investment opportunities within digital infrastructure. In aggregate these deals comprise a total equity opportunity of $350m in the United States and United Kingdom.
|B2B Digital Infrastructure||UK||$40m||Current AF3* Investment|
|Fiber Broadband Connectivity||US||$45m||Exclusivity|
|MDU / FTTH||US||$70m||Discussions Ongoing|
Below is further detail on two of Alinda Capital Infrastructure’s digital investment opportunities.
Fiber Broadband Connectivity – United States
Alinda Capital Infrastructure’s pipeline includes a fiber broadband connectivity opportunity in the United States, which requires $45m (£33m) of equity. Further, this deal will be financed with leverage levels of ~3.5x EBITDA on average over the investment period, equivalent to <25% debt-to-capitalization. Indeed, this implies ~$15m in debt will be utilized and a $60m enterprise value for the transaction.
Particularly, the transaction is within a single U.S. market and is a 100% carve-out of an owned network from a national telco company. In terms of services, this national telco company offers broadband, voice, and video to commercial and consumer customers. Overall, the fiber network comprises 3.1k miles (5.0k kilometers), connecting 140k households and 15k businesses.
Data Centers – QTS Realty Trust
Alinda Capital Infrastructure’s pipeline also contains data center investment opportunities, which require $110m (£80m) of equity. These prospective deals extend from Alinda’s existing joint venture with QTS Realty Trust. Through this partnership, Alinda has access to a portfolio of colocation and hyperscale data centers in the United States.
Particularly, Alinda is considering investments in tier 1 and 2 markets, which include both large wholesale and retail colocation customers. Notably, the assets would be owned in a 50%/50% joint venture structure with QTS Realty. Finally, Alinda’s agreement with QTS Realty stipulates that it can invest in these data centers at a 6.75% cap rate.
Middle-Market Track Record – Alinda Capital Partners
From February 2014, through June 30, 2021, Alinda Capital Partners has deployed almost $3bn through 17 middle-market infrastructure investments. Alinda’s middle-market track record to June 30, 2021, has delivered a gross IRR of 19.3% and a 1.8x gross MOIC. Below is Alinda’s cash yield and capital appreciation generated since 2014 through its middle-market track record.
Alinda Capital Partners has deployed 39% of its middle-market track record capital into digital infrastructure, which includes:
- QTS JV: 50%/50% joint venture owning QTS’ Manassas (DC-1) data center, with an expected stabilized value upon completion of $240m
- Glide Group: UK provider of broadband, networks, and utilities for student accommodation, house-sharers, and small- and medium-sized enterprises
- EmiTel: owns 350 broadcast towers in Poland to distribute television and radio signals nationwide for television and radio broadcasters