Digital Realty To Acquire Ascenty
The strategic transaction is designed to establish Digital Realty as leading data center provider in Latin America.
Digital Realty has announced its Brazilian subsidiary, Stellar Participações Ltda., has entered into a definitive agreement to acquire Ascenty, a leading data center provider in Brazil, from private equity firm Great Hill Partners in a transaction valued at approximately $1.8 billion. Digital Realty has separately entered into an independent bilateral equity commitment letter with Brookfield Infrastructure, an affiliate of Brookfield Asset Management, one of the largest owners and operators of infrastructure assets globally, under which Brookfield has committed to fund half of the required initial equity investment, currently estimated to be approximately $613 million, excluding Brookfield's share of the transaction costs, in exchange for 49% of the total equity interests in a joint venture entity expected to ultimately own Ascenty.
Positions Digital Realty as Leading Provider in Rapidly Growing Latin American Region
Premier, high-quality portfolio: Ascenty is a leading data center provider in Latin America with an in-service portfolio of eight state-of-the-art data centers strategically located in the key Brazilian metro areas of São Paulo, Campinas, Rio de Janeiro and Fortaleza. Most of the Ascenty facilities have been designed and built to Tier III standards and meet internationally recognized facility and service standards. Given its high-quality portfolio, Ascenty serves a blue-chip customer base comprised primarily of leading global hyperscale cloud providers, with over 90% of Ascenty's contractual cash rent attributable to customers whose parent entities have investment-grade or equivalent credit ratings. In addition, leases representing approximately 75% of Ascenty's contractual cash rent, including signed but not yet commenced leases and leases pending execution that are subject to closing or other conditions, are denominated in U.S. dollars, substantially mitigating foreign currency exposure.
Significant embedded growth pipeline: The Latin American region represents a compelling opportunity for future data center growth, driven by positive macro and demographic factors, including growth in the working age population and rapid digitization. Brazil is the fifth-largest country in the world by area and population as well as the eighth-largest economy by gross domestic product, and is poised to become the hub of Latin America's future technological expansion. Ascenty has a significant opportunity for growth through future development in Brazil and is well-positioned to meet growing demand through expansion across the Latin American region. The Ascenty portfolio is comprised of 106.2 megawatts (MW) of total planned capacity, including 39.2 MW of capacity currently in-service, 34.0 MW of capacity under construction and 33.0 MW of potential additional capacity. In addition, Ascenty has options or leases on five separate sites representing up to an estimated incremental 66.5 MW of potential future growth capacity.
Proprietary fiber network represents competitive advantage: Ascenty provides differentiated connectivity solutions to its data center clients through a proprietary, ~ 4,500-kilometer fiber optic network connecting Brazil's primary technology, finance, and population hubs of São Paulo, Campinas, Rio de Janeiro, and Fortaleza. The highly reliable fiber optic system is owned by Ascenty and represents a key competitive advantage, providing customers direct access to the major Brazilian telecom operators, peering points and subsea cable networks.
Experienced management team: The Ascenty management team will remain in place and will maintain day-to-day responsibility for operations in the region. The Ascenty management team is led by chief executive officer Christopher Torto, who co-founded Ascenty and previously founded Vivax, the second largest cable TV company in Brazil, which went public in 2006 and was sold in 2007.
In addition, Torto is rolling forward the substantial majority of his Ascenty equity into Digital Realty operating partnership units and equity in the new joint venture. Torto and the Ascenty management team have significant experience building and scaling businesses within Latin America and have built a leading network of data center facilities in Brazil.
Co-investing alongside an experienced partner: Brookfield is a leading global asset manager, with over $285 billion of assets under management. Brookfield has been investing in Brazil for over 100 years, and is now one of the largest investors in the country, with over $40 billion of assets under management, including: more than 3,500 kilometers of toll roads; an integrated rail and port logistics business; a 2,000-kilometer regulated natural gas pipeline system; 4,200 kilometers of electricity transmission lines (including lines built and to be constructed); the largest private sanitation company; and several commercial and retail properties, including a portfolio of high-quality commercial properties in São Paulo and Rio de Janeiro. Digital Realty expects to benefit significantly from investing alongside a sophisticated partner with a long history of investing in the region.
"We are pleased to expand our global footprint into Latin America and to partner with the Ascenty management team and Brookfield. We expect this acquisition will further accelerate our growth while enhancing our ability to support our customers' digital transformation across the globe," said Bill Stein, chief executive officer, Digital Realty. "This transformative transaction represents consistent execution against the new market strategy we articulated at our Investor Day last December, and immediately establishes us as a market leader within an historically under-served region poised for rapid growth. We are also gratified to partner with Brookfield on this transaction, leveraging their extensive experience as a regional investor and operator. This acquisition advances our strategy of sourcing strategic and complementary assets to strengthen and diversify Digital Realty's data center portfolio and expand our product mix and global footprint."
"We're delighted to join Digital Realty's global platform and partner with Brookfield to provide our customers access to one of the largest networks of interconnected data centers in the world. Our combined platform will be uniquely positioned to provide our customers the full spectrum of data center solutions along with the ability to support their growth on a global basis, and we look forward to working with the Digital Realty and Brookfield teams to extend our state-of-the-art data center and connectivity solutions to capitalize on the rapidly growing demand within the region," said Torto.