DigitalBridge (formerly Colony Capital) has been named in press reports from Bloomberg noting that the digital infrastructure private equity firm is “in advanced talks to acquire data-center assets from PCCW”. Specifically, PCCW’s data centers reside in the company’s Solutions division and could be valued at $600m+ in a potential transaction.
With this dynamic in-play for DigitalBridge (formerly Colony Capital), we breakdown the data center portfolio and recent digital infrastructure strategy of PCCW Solutions. Additionally, we highlight DigitalBridge’s existing data center investment in the Asia-Pacific region, namely Agile Data Centers (AgileDC).
PCCW Solutions – DigitalBridge Positioned to Buy
PCCW Solutions operates at 9 data center locations in Hong Kong, Mainland China, and Malaysia. Specifically, the company’s portfolio comprises 75+ megawatts of power capacity, across 1.3 million sqft of gross floor area. Overall, PCCW Solutions currently has a 95%+ occupancy rate across its data center portfolio.
Additionally, the company is in the process of building a new facility in Tsuen Wan West, Hong Kong, and is targeting completion in late 2022.
In Hong Kong, PCCW Solutions offers 65+ megawatts of power capacity, across 1.2 million sqft of gross floor area. Notably, ~90% of the company’s power capacity resides in Hong Kong.
Hong Kong is a strategic data center market, acting as a hub for cross-border data center services with Mainland China. Indeed, the market provides multi-national corporations with access to China, while Chinese companies can use Hong Kong to expand their services into international markets.
Kwai Chung (MCX 10)
MCX 10 comprises ~18 megawatts of power capacity, across 266k sqft of gross floor area. Known as Powerb@se MCX 10, this the company’s flagship facility, offering 3.8k+ racks of capacity.
Fanling (On Ting)
On Ting comprises ~3 megawatts of power capacity, across 42k sqft of gross floor area.
Fanling (On Lok)
On Lok comprises ~11 megawatts of power capacity, across 175k sqft of gross floor area. This high-power density facility offers 1.0k+ racks of capacity.
Fo Tan (BWO)
BWO comprises ~6 megawatts of power capacity, across 147k sqft of gross floor area.
Fo Tan (SLC)
SLC comprises 20 megawatts of power capacity, across 185k sqft of gross floor area. Notably, this data center encompasses a 13-story building.
Tseung Kwan O (TKO)
TKO comprises ~7.8 megawatts of power capacity (Phase 1 only), across 370k sqft of gross floor area.
Cyberport comprises ~2.5 megawatts of power capacity, across 14k sqft of gross floor area.
Mainland China (Guangzhou)
CDC comprises ~2.4 megawatts of power capacity, across 25k sqft of gross floor area. Notably, this facility sits in one of the core network connection gateways for China Unicom in Guangzhou.
Malaysia (Kuala Lumpur)
CJ1 comprises ~6.0 megawatts of power capacity, across 40k sqft of gross floor area. Notably, PCCW Solutions entered the Malaysia market via a ~$32m acquisition of this facility in Cyberjaya, which closed in September 2020.
PCCW Solutions – Strategy and Positioning
Beyond PCCW Solutions’ existing markets of Hong Kong, China, and Malaysia, the company notes that it wants to invest further in scaling its Southeast Asia data center operations. This is in response to the growing data center demand in those regions as well as meeting the existing requirements of its customer base.
Recently, demand for PCCW Solutions’ data centers has been robust. In turn, for the year ended December 31, 2020, recurring revenue grew by 27% year-over-year for the division’s data centers and managed services.
AgileDC – DigitalBridge’s Vehicle for PCCW?
PCCW Solutions could be acquired by Agile Data Centers (AgileDC), a portfolio company of DigitalBridge’s flagship private equity fund, Digital Colony Partners II. Specifically, the company is a hyperscale data center platform pursuing greenfield data center developments across seven countries in Asia. Currently, AgileDC has two projects under construction in Japan, with sites in both Tokyo and Osaka.
While DigitalBridge’s AgileDC is clearly focused on developing data center capacity through greenfield expansion, the vehicle could be used to purchase PCCW Solutions’ data centers. Indeed, given the challenging nature of securing land for data center development in Hong Kong, AgileDC could decide to make an exception to its greenfield approach.
To this end, during DigitalBridge’s 2021 Investor Day, the company referred to AgileDC and the “opportunity, clearly, in Japan, Korea, Taiwan, Hong Kong, even down to Singapore and Australia”. Note that in June 2021, Colony Capital (including Digital Colony) changed its name to DigitalBridge and thus would be the financial sponsor backing any acquisition of PCCW Solutions.