The emergence of digital infrastructure as an asset class

Tim Hannon

Conrad Capital Group

As with most industries, real estate is evolving. Retail real estate has historically been the dominant real estate asset class, but due to the competitive impact of eCommerce it has lost its premium rating. Retail rental growth is waning, and in some cases turning negative. To compete with eCommerce, retail landlords will need to reorient their offering. This will be a difficult, lengthy and costly process. We have written extensively about these powerful headwinds; retail real estate should be avoided.

digital real estate

The direct beneficiaries of ecommerce and the growth of the digital economy are data centres and physical digital infrastructure assets such as fibre and towers.

An example of this asset class becoming more mainstream is the current float of “360 Capital Digital Infrastructure Fund”.

Australian real estate company, 360 Capital is finalising a capital raising of $115 million to build a portfolio of digital infrastructure assets. Their rationale for investment in the Fund is:

“the digital revolution is creating an opportunity to invest in technology infrastructure assets to support the rapid growth of cloud, Internet of Things and the hyper connected world”

The Fund is targeting a 10% internal rate of return for investors.  To provide an example of the type of asset within the portfolio, the Fund will contain a Perth based data centre, leased to an operator for six years, generating a yield of 6.5%.

We expect the 360 Digital Infrastructure Fund will be provide a solid vehicle for investors to gain access to digital infrastructure assets and the growth of the digital economy.

Data Centres

The investment trend into data centres is gaining traction globally. Major global telecommunication companies have begun to sell their data centres and technology infrastructure into Funds. For example, Australian analysts and investors are assessing whether Telstra (TLS) should sell their infrastructure assets into a Fund (assets such as data centres, fibre and cables).

In this note we focus on one of the largest digital real estate assets classes – data centres.

Please see the attachment to read our full report on digital infrastructure as an asset class

Lucerne Investment Partners 

4 stocks mentioned

Tim Hannon
Tim Hannon
Managing Director
Conrad Capital Group

Tim has 25 years’ experience in the investment and securities markets. Tim was a partner of Goldman Sachs and during his 16-year tenure at the firm had senior experience across all areas of equities investing.

I would like to

Only to be used for sending genuine email enquiries to the Contributor. Livewire Markets Pty Ltd reserves its right to take any legal or other appropriate action in relation to misuse of this service.

Personal Information Collection Statement
Your personal information will be passed to the Contributor and/or its authorised service provider to assist the Contributor to contact you about your investment enquiry. They are required not to use your information for any other purpose. Our privacy policy explains how we store personal information and how you may access, correct or complain about the handling of personal information.


Sign In or Join Free to comment