Goldman’s Infrastructure Arm Makes $500 Million Data Center Bet

Gillian Tan (Bloomberg) -- Goldman Sachs Group Inc. is betting on data centers.

The New York-based firm’s infrastructure arm, part of its merchant bank, agreed to invest an initial $500 million in Global Compute Infrastructure LP, a platform helmed by Scott Peterson, the former chief investment officer at Digital Realty Trust Inc.

“We think the industry has tremendous tailwinds amid continued penetration of cloud service providers,” Scott Lebovitz, global co-head and co-CIO of Goldman’s infrastructure investment group, said in an interview. Digital migration trends, already under way before the Covid-19 pandemic hit, have accelerated, he said.

Including debt, Global Compute will have a roughly $1.5 billion war chest to do deals in North America, Europe, Latin America and Asia Pacific. As future opportunities arise, Goldman and its fund investors may contribute additional capital toward the venture, Lebovitz said.

Data center transaction valuations have risen in recent years as the sector won favor with institutional investors in part because of expected ongoing growth. Lebovitz said Goldman Sachs has confidence in Global Compute’s operating expertise in various areas. Peterson, Global Compute’s chief executive officer, oversaw some $17 billion in deal volume across both organic development and mergers and acquisitions during his tenure at Digital Realty.

Related:Investment Bankers Expect the Pandemic to Fuel a Long-Term Data Center Boom

“There’s so much capital chasing deals, but based on the breadth of our track record, we believe we can find, evaluate and underwrite transactions as well as serve the critical needs of our customers,” Peterson said in an interview.

Peterson and Global Compute Chief Operating Officer Chris Kenney were longtime executives at real estate investment trust Digital Realty. Another Digital Realty veteran, Stephen Taylor, is Global Compute’s head of Europe.

Global Compute separately agreed to acquire ATM SA, a Polish data center and communications infrastructure business, from a group led by MCI and Mezzanine Management. Both Microsoft Corp. and Alphabet Inc. have announced plans to invest heavily in Poland.

Following the Global Compute investment, Goldman’s third infrastructure fund -- at $2.5 billion - is now more than 70% deployed. The firm is preparing to raise a fourth fund, likely dubbed West Street Global Infrastructure Partners IV LP, early next year, according to people with knowledge of the matter. A Goldman spokeswoman declined to comment on fundraising plans.

Global Compute isn’t Goldman’s first foray into data centers. Its special situations arm previously owned a stake in AirTrunk, which it sold earlier this year to an arm of Macquarie Group Ltd.