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Infrastructure investors catch the tech bug

Hong Kong

AN unsexy corner of the investment world is getting a little racier. The infrastructure and real estate investment arm of Macquarie is in advanced talks to buy data centre company AirTrunk for over A$3 billion (S$2.8 billion), Bloomberg reported last week. Growing data consumption is fuelling demand for storage warehouses, especially in the Asia-Pacific. It is the latest way that technology is turning a humdrum thing into a hot bet.

Goldman Sachs and TPG-backed AirTrunk is busy building a network of so-called hyperscale data centres in Sydney, Hong Kong and Singapore, and plans a rapid expansion across the region. These kinds of outfits, where cloud meets the ground, are enjoying a record merger and acquisition (M&A) bonanza - volumes almost tripled last year, with 55 deals valued at a combined US$14.4 billion, versus 22 worth US$5.5 billion a year earlier, according to Dealogic.

A hunger for reliable yield assets is building up towering multiples, too. Australia's NextDC and US-listed Chinese developer-operator GDS trade at 29 and 45 times last year's earnings before interest, tax, depreciation and amortisation (Ebitda), respectively. Assuming that AirTrunk's annualised contracted Ebitda stands at over A$100 million, as reported by The Australian Financial Review, the mooted sale price - if it includes debt - could be roughly 30 times.

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Data usage trends from cloud adoption to the advent of 5G mean that developers cannot keep up with demand. In the Asia-Pacific, Internet users climbed 10 per cent year-on-year between 2016 and 2018, according to Jones Lang LaSalle. Meanwhile, global revenue for the "co-location" data centre market, where companies provide a shared, secure space for servers, is growing at a compound annual rate of 15.7 per cent, and is expected to reach US$60 billion by this year, the property services firm reckoned.

Warehouses have also had a boost from the rise of e-commerce, as everyone from Amazon to Walmart competes for speed on delivery of goods. In the United States, Prologis agreed last October to buy Liberty Property Trust in a nearly US$10 billion all-stock deal. True, similar bubbles have burst in the past. Demand for data centre capacity collapsed between 2001 and 2004 after the dotcom bubble burst, for example. Yet with no sign of a crunch, demand for new oil should further drive deal-making. REUTERS