DigitalBridge Group, through its on-balance sheet pool of capital, announced the expansion of its Vantage SDC (Stabilized Data Centers) portfolio with the acquisition of CA22, a 24-megawatt hyperscale data center serving the Santa Clara, California market. Specifically, Vantage SDC is purchasing the facility, in a transaction valued at $539m, from Vantage Data Centers (North America), a portfolio company of Digital Colony Partners I, DigitalBridge’s private equity fund.
Notably, Vantage SDC has a forward contract in-place with Vantage Data Centers (North America) to acquire stabilized hyperscale data centers at a ~5% cap rate.
CA22 – Santa Clara Data Center – Vantage SDC
Vantage SDC is adding the CA22 data center to its portfolio, which resides in Vantage Data Center’s CA2 campus, located at 737 Mathew Street, Santa Clara, California. The CA22 facility offers 95.7k sqft (max) and currently has 71.8k sqft leased, which implies 75% utilization.
Additionally, Vantage SDC fully-owns the CA21 facility, which is next to the CA22 building on the Santa Clara campus.
Vantage Data Centers (North America) will continue to manage and operate CA22 as part of its data center footprint. Therefore, Vantage SDC is investing in the CA22 facility as purely an infrastructure or “yield” opportunity. This is enabled because the investment is backed by long-term and investment grade leases from tenants like Microsoft and Nvidia.
READ MORE: Northern California Data Centers – Silicon Valley
Portfolio – Vantage SDC
Prior to today’s announcement, Vantage SDC operated 12 data centers, representing 153 megawatts of power capacity. Overall, these data centers comprise 1.4 million sqft, with a portfolio utilization of 95%, supporting over 80 customers.
Vantage SDC’s CA22 extends its footprint to 13 stabilized hyperscale facilities across North America with 177 megawatts of power capacity.
Transaction Details
Vantage SDC’s acquisition of the CA22 facility represents its first hyperscale data center purchase since its formation in July 2020. Prior DigitalBridge-led investments resulted in the acquisition of a 90% equity interest in Vantage SDC as part of a transaction where $1.36bn of equity and $2.0bn of secured debt was funded.
However, DigitalBridge only owns a 13% minority interest in Vantage SDC through its balance sheet. Vantage SDC’s remaining shareholders include co-investors such as CBRE Caledon (CBRE Investment Management).
Funding – Bolt-On Acquisition
Vantage SDC will fund the CA22 acquisition through existing debt facilities, a new $105m term loan arranged by TD Securities, and cash on-hand.
Risk-Return Profile
DigitalBridge targets lower risk digital infrastructure assets with “consistent returns” for its balance sheet. Specifically, these investments generate free cash flow, produce a 5% to 6% cash yield annually, and are REIT-eligible. At the same time, these assets are on long-term leases with investment grade counterparties.
Based on this risk profile, DigitalBridge seeks an IRR between 10% to 12% for investments on its balance sheet. Notably, these returns are materially lower than the levered returns the firm seeks through its private equity funds (i.e., 15%+).
