Digital Realty and Brookfield Infrastructure Partners today announced the establishment of a 50%/50% joint venture to develop and operate data centers in India, under the brand BAM Digital Realty. Notably, “BAM” is an acronym for Brookfield Asset Management, the parent company of Brookfield Infrastructure.
Finally, the joint venture is expected to close in the second-half of 2021.
Data Center Joint Venture – BAM Digital Realty
BAM Digital Realty intends to acquire land parcels in multiple metros in India for the development of data center campuses. Indeed, this mission implies that no seed assets have been acquired to-date or contributed to the joint venture as part of its formation.
BAM Digital Realty will support the needs of global hyperscale service providers as well as international and local enterprises. Specifically, the joint venture will draw from Digital Realty’s existing hyperscale customers to provide these companies with capacity in India.
For example, Digital Realty’s largest existing hyperscale customers include Microsoft, IBM, Facebook, Oracle, Apple, Amazon Web Services (AWS), LinkedIn, Salesforce, Google, and TikTok (ByteDance).
India Data Center Market
From a macroeconomic perspective, India is an attractive investment destination with its 1.4+ billion population, status as the world’s fifth-largest economy by GDP, and an increasing prevalence of the digital delivery of services.
India’s data center demand will significantly increase in the coming years, driven by growing data consumption, digitization of the economy, the roll-out of 5G, and data localization requirements.
Digital Realty, Brookfield Infrastructure – Partnering Again
Digital Realty and Brookfield Infrastructure’s partnership in India builds on their existing joint venture in Latin America through the data center operator Ascenty. Notably, Digital Realty owns a 51% equity interest in the Ascenty joint venture, while Brookfield Infrastructure owns the remaining 49%.
As of Q1 2021, Ascenty’s total assets were valued at $1.87bn. The company has 250+ megawatts of IT load capacity, either fully-built out or currently under construction in Latin America. Specifically, Ascenty has data centers in São Paulo (Brazil), Rio De Janeiro (Brazil), Fortaleza (Brazil), Santiago (Chile), and Querétaro (Mexico).
Why No Local Operating Partner? – Digital Realty, Brookfield Infrastructure
One glaring omission from today’s announcement by Digital Realty and Brookfield Infrastructure was the lack of local operating partner as part of the BAM Digital Realty joint venture in India.
Given that the joint venture is development-oriented, with the mandate to “design, build and operate sustainable facilities” the need for an operating partner is arguably more acute. For example, India operates under a feudal system for land ownership and tenure. Therefore, obtaining clean title to land for data center development is not possible, which is a key component of a long-term data center strategy. A local operating partner would bring experience in dealing with these nuances surrounding land, amongst other local issues.
Differences to Ascenty Joint Venture
Digital Realty and Brookfield Infrastructure’s prior Ascenty joint venture also differs from BAM Digital Realty in that the initial Ascenty investment included operating data center assets and came with an experienced, local management team. Specifically, Ascenty’s management team was led by Chief Executive Officer Chris Torto, who also was a co-founder of the business.
Other U.S.-headquartered data center operators who have recently entered India have partnered with or acquired local management teams. Specifically, EdgeConneX partnered with Adani Enterprises, Iron Mountain invested in Web Werks, and Equinix purchased GPX India.
Brookfield Asset Management (BAM) – Digital Infrastructure
Brookfield Asset Management has 10+ years of experience investing in India, with ~$20bn of assets under management in the country. The firm’s investments in India span infrastructure, renewable power, real estate, and private equity.
At the same time, Brookfield has an extensive global digital infrastructure portfolio which includes towers, data centers and fiber:
- Towers: Brookfield owns a portfolio of 185k contracted sites across six markets, including India, France, the UK, and New Zealand. Importantly, in India, Brookfield has a portfolio of 139k operational telecom wireless towers, which it intends to expand to 175k
- Data Centers: Brookfield owns 50+ data centers globally. Specifically, operators of these facilities include Evoque in the U.S., Ascenty in Brazil, and DCI Data Centers in Australia
- Fiber: Brookfield operates a portfolio of 12.4k route miles (20.0 route kilometers) of fiber