Spire Capital Pty Ltd (“Spire”) continues to have high conviction in select pockets of global private markets (i.e. ‘sweet spots’). This includes working in partnership with Valterra Partners LLC (‘Valterra’), to find attractive direct co-investment opportunities within the field of private equity infrastructure. More specifically, this means investment opportunities attached to essential services, underserved end-markets and long-term secular demand trends (e.g. data consumption).

As the world progresses through COVID-19 crisis, the resiliency of “Core” infrastructure assets is being tested as air travel, vehicle movements, energy demand and port throughput are all materially impacted. Meanwhile, data is proving to be essential to all sectors of the economy through the disruption. Data volumes in 2022 are forecast to be 3x those recorded in just 2017 and 11x 2012 as data intensity increases and use cases multiply. Internet users, connected devices and speeds continue to increase significantly, creating significantly more demand for data infrastructure services. The assets that provide the access to data (towers, fiber and datacenters) are increasingly being viewed as critical infrastructure to the economy. Data centres are increasingly being viewed as infrastructure assets because they possess many of the same key attributes as traditional core infrastructure investments including long term contracts, stable and predictable cash flows, high free cashflow generation and stable underlying demand drivers.

For the last 12 months, Spire has been working with Valterra to better understand the global landscape for data and the infrastructure that enables its transmission. Data Centres sit at the centre of the data infrastructure system as the point where crucial storage and computing takes place. In particular, data centres at the “edge”, i.e. close to major metropolitan areas and thus close to end consumers, are increasingly important as the internet architecture undergoes a significant transformation as a result of the requirement for zero latency from many users.

Within the data centre universe sits Retail Colocation whereby data centre services are offered to medium-large enterprises and to managed service providers for smaller enterprises. Currently, 60% of such enterprises do not locate in data centres, providing a significant opportunity for growth. Data centre colocation has numerous benefits (vs. having an on-premise ‘server closet’) including security, energy efficiency, networking, access to dark fiber, proximity of multiple ISPs, uninterrupted power supply and virtually 100% up-time. In addition, enterprise transition to retail colocation over traditional storage has been shown to reduce data storage and computing costs by 60-70%. Retail colocation services in edge locations also allow large enterprises to have smaller “points of presence” close to consumers with the lowest available latency.