Brookfield Infrastructure Partners is bulking up in anticipation of rising demand for data storage as artificial intelligence and cloud computing expand by buying almost all of the assets of Cyxtera Technologies Inc.DADO RUVIC/Reuters
Brookfield Infrastructure Partners LP BIP-N is buying almost all of the assets of data centre company Cyxtera Technologies Inc. CYXTQ out of bankruptcy for US$775-million, bulking up in anticipation of rising demand for data storage as artificial intelligence and cloud computing expand.
In addition to the asset purchase, supervised by a U.S. court, Brookfield’s infrastructure arm is also buying up the real estate where seven Cyxtera data centres are located from Digital Realty Trust Inc. DLR-N and Digital Core REIT, bringing the total purchase price to US$1.3-billion.
Brookfield plans to combine the Cyxtera assets with a company it already owns, Evoque Data Center Solutions, to reduce overhead and financing costs. The combined entity joins a US$11-billion data centre portfolio that includes two other notable acquisitions that Brookfield recently closed: Data4, which is based in France, and Dallas-based Compass Datacenters, which Brookfield bought in tandem with Ontario Teachers’ Pension Plan.
Cyxtera filed for bankruptcy in June as it struggled to pay down debt and raise new financing, two years after the company went public at a US$3.4-billion valuation. The company has a separate agreement to sell its business in its Montreal and Vancouver data centres to Cologix.
Brookfield Infrastructure chief executive officer Sam Pollock said Evoque’s first couple of years under its ownership “have been challenging,” but that the business has enjoyed a turnaround in its leasing activity over the past year after making upgrades.
When combined with Cyxtera’s assets and real estate, “it really is a very, very different business than what the two were separately,” Mr. Pollock told analysts on a conference call Wednesday.
Brookfield is bullish on owning data centres, anticipating financial tailwinds from what Mr. Pollock called “the exponential increase in demand” from corporate customers that are incorporating artificial intelligence technologies into their businesses and moving more of their data to cloud storage. That requires vastly greater amounts of storage and computing power, as well as energy to power the buildings that house servers.
Brookfield Asset Management Ltd. BAM-T CEO Bruce Flatt has called data “the largest and fastest-growing commodity around the world,” and said that the widespread adoption of generative artificial intelligence has set off “another step change in data consumption.”
Brookfield Infrastructure also reported third-quarter financial results on Wednesday that included a 7-per-cent increase in funds from operations – a measure of cash generated in the business that serves as a barometer of operating performance – to US$560-million, compared with a year earlier.
Profit was US$104-million, or 3 US cents a unit, compared with US$113-million, or 5 US cents a unit, in the same quarter last year.
Looking ahead, Mr. Pollock sees opportunities to make lucrative investments as many infrastructure investments are linked to inflation and produce stronger returns as interest rates rise.
“Our 2023 investments are expected to provide us with some of the best risk-adjusted returns we have seen in the last decade,” Mr. Pollock said.