Dons of the Data-Center Game

The Promote tries to understand any emerging world through the people at the 💗 of it. You can try putting numbers to the data-center industry, but it’s kind of useless, as seemingly every other week people are adding a zero to the TAM of the space, and someone is raising a new billion-dollar fund while hitting all the talking points (Gen AI boom, compute, hyperscalers etc. etc.) Instead, we think a more helpful heuristic is to highlight some of the key players. By observing what they’re doing and how they’re allocating (or retreating), you might get a better sense of where things might be heading.

Data Center Dons (Cont.)

1) The Sheikh: In the world of high finance, no man is more coveted than Sheikh Tahnoon Bin Zayed Al Nahyan, the aviator-sporting, Jiu-Jitsu loving brother of UAE ruler MBZ and steward of a collection of SWFs that together manage $1.5 trillion. Sheikh Tahnoon is in all the rooms that matter, hobnobbing w/ POTUS 🦅 one day to talk chip and US-data center investments, kibitzing w/ Microsoft boss Satya Nadella, Nvidia’s Jensen Huang and BlackRock chief Larry Fink – all huge players in the space – the next. He chairs both MGX and G42, the key vehicles through which the UAE makes its data-center investments. One CRE titan who formed an early r’ship w/ Sheikh Tahnoon was the late, great Sam Zell, who advised him on development ventures and went hunting w/ him & MBZ. Per Bloomberg, one way to get to Sheikh Tahnoon is through his close confidant Sofia Abdellatif Lasky. 🕶️

2) The platform: Cloud-computing provider CoreWeave, which is building out data centers for hyperscalers, went public last week, and initial signs haven’t been pretty - its IPO was downsized significantly to $1.5B, and existing investor Nvidia anchored the process – w/o it, the IPO “wouldn’t have closed,” CoreWeave CEO Michael Intrator acknowledged. Nearly 2/3 of CoreWeave’s revenue last year came c/o Microsoft, which has already pulled back a tad from new projects. The company received unusually structured “metaphorical lockbox” financing led by Blackstone, and recently disclosed it had foot-faulted on that debt. 🎾 

3) The evangelist: The silver-tongued Marc Ganzi has become one of the biggest investors and certainly the most visible institutional face of the data-center business. When he’s not on the polo circuit, the DigitalBridge boss is galloping through keynotes and TV hits touting the vast and still-mostly untapped potential of AI, and how firms like his are serving as the digital railroads of this new economy. DigitalBridge also participated in the CoreWeave financing 👆️ and co-led a $9B+ investment into Vantage last year.

4) The brokers: Everyone seems to agree that DH Capital was the first 🤙 for big-ticket data-center transactions. The MDs there brokered a bunch of the heftiest deals, such as the $15B+ CyrusOne sale to KKR/GIP in ‘21. Citizens Bank absorbed the firm in late ‘21. In summer ‘23, Newmark came calling for one of its key rainmakers, Brent Mayo, and he’s helped stand the brokerage up as a real player in the space. The specialized knowledge (from compute to capex to energy) needed in data centers is so vast that if you’re one of the guys, you’re a hot target.

5) The scribe: It gives me great pleasure when I discover a quality publication that really nails its beat – they are sadly few and far between these days. But we’ve got ourselves a gem here in Data Center Dynamics, which has staggeringly good coverage of the industry’s players and key topics, from cooling to construction to compute. 🧢 

6) The briefcase: You can find Simpson Thacher’s Brian Stadler deep in the weeds on some of the defining data-center M&A deals, such as Blackstone’s $10B acquisition of QTS in ‘21. 💼 I’d love to see what the deal docs on these things look like – feels like a billable-hour bonanza 😍 

7) The suit: Though Steve Schwarzman is the Kurt Cobain of Blackstone’s heavily publicized AI push, much of the actual work falls to CFO Michael Chae. The firm’s bets in this field are massively structured, and Chae’s been at the center of them – think of the CoreWeave financing described above, or the take-private of QTS. ➗ 

8)The wildcard: We’re all waiting to see what happens w/ this one: Zuck’s Meta is planning a gargantuan push into the data-center development game, and needs $35B to fund the caper. Apollo might step up as the anchor financier on the venture, which would instantly catapult it into the top ranks of lenders in the space. Huge TBD – as we’ve discussed recently here, thanks in part to Apollo’s reimagining of the insurance biz as a source of equity for pvt-credit bets, it has quite a bit of money to play w/ 🦞 

OZK Takes Back Keys at Chicago Megaproject

Sterling Bay is no longer King in the North: The developer is surrendering a chunk of the 53-acre site for its Lincoln Yards megaproject to its lender, the most serious sign yet that its $6B, 14.5M sf undertaking is at risk. Bank OZK is expected to take over the northern tract in a deed-in-lieu, per a Sterling Bay investor letter viewed by Crain’s. "While this is an unfortunate pause in the development," Sterling Bay CEO Andy Gloor wrote, “all parties involved remain committed to the transformative vision of Lincoln Yards."

OZK, which has spoken of exercising more caution on its construction bets, had tried to make this one work: it extended the $126M debt multiple times, but in Oct. told investors it was "growing less patient with the progress." After a couple write-downs, the bank made its move; it will now move to shop the parcel to a new sponsor, per a statement to Crain’s. Any sale could warp Sterling Bay’s original vision for the site, which sought to redevelop a steel plant and pull of a Hudson Yards-scale project on the Chicago riverfront, adding millions of sf in office and lab space and 6K resi units. The only building completed so far is a life-sci lab that has languished on the leasing market for 2Y. The $125M lender on that one, is OZK too. 👀

The developer is still in the hunt for a new equity partner after its two main backers – JPMorgan and Lone Star – decided they wanted out; Sterling Bay courted the Chicago Teachers' Pension Fund & Kayne Anderson to come in as the money, but no 🎲 

Quickies

• 🎥 Crunching the numbers on Naftali’s Fifth Ave megadeal

• Mega resi mortgage M&A: Rocket paying $9.4B for Mr. Cooper 🚀 

• C-Pace originations kissing $10B as mechanism goes mainstream 🌳 

• BlackRock’s Larry Fink wants everyday Americans as LPs 🧑‍🤝‍🧑 

• Apollo in talks to take space at 590 Madison (STRS shopping building)

• Exit East: Wanda puts 37 units up for bulk sale at St. Regis Chicago condo

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