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Investors pay over $1bn for California data centre developer

PSP Investments, part of the consortium, said it expects returns higher than core infrastructure assets for the internet infrastructure company.

A team of US and Canadian investors have invested over $1 billion in a Silicon Valley data centre developer amid growing interest for the burgeoning infrastructure subsector of internet communications.

Telecoms infrastructure company Digital Bridge Holdings, Canadian pension manager PSP Investments and Nuveen, the investment arm of TIAA-CREF, teamed up to buy Vantage Data Centers from technology buyout firm Silver Lake. The deal also provides growth capital for the company to develop current and future projects.

Founded in 2010, Vantage has built four data centres in Santa Clara, operates a 6MW system in Washington and has two more under construction. The systems Vantage has built in Santa Clara require 51MW of energy to power their operation.

The company’s management team, including chief executive Sureel Chokso, will be retained, but Digital Bridge will install its senior advisor Mike Foust as chairman of Vantage’s board of directors. Digital Bridge principal Raul Martynek will also join the board.

Internet infrastructure assets like data centres have caught the interest of investors recently thanks to the high growth potential and attractive returns they typically offer. Stonepeak Infrastructure Partners acquired a majority interest in Cologix, a Colorado-based data centre developer, last month.

Daniel Garant, PSP Investment’s chief investment officer, said this type of assets mixes elements of infrastructure, real estate (because of the need for land) and private equity (due to their growth potential). He said he expects returns higher than typical core infrastructure performance from Vantage.

“What really attracted us to this opportunity is the fact that you’re right in the centre of Silicon Valley, in a region where there’s a lot of need for data,” Garant said. “The capacity to store data and access data is extremely important, especially for some customers who want to be able to access data near where they are conducting their operations.”

Vantage contracts its data centre services to technology-intensive companies, cloud service providers and other large enterprises.