Cool Vector

West Texas Land is Perfect for Data Centers, Says LandBridge Founder

David Capobianco's company, ⁠LandBridge⁠, owns 270,000 surface acres in West Texas, and he's pleased to explain why the land's profitability has tripled in three years. The reason has to do with data centers.
LandBridge is a publicly traded affiliate of Five Point Energy, of which Capobianco is CEO. The company's share price is being carefully watched by investors looking for evidence of a new paradigm in land ownership. Acreage once used primarily for ranching or energy extraction in the Permian Basin is now seen as ideal for data centers.
n an wide-ranging interview with Cool Vector, Capobianco details the attractive features of his "powered land" in the Delaware sub-basin, spanning West Texas and New Mexico: it sits on top of the lowest-cost natural gas in North America, it has plentiful produced and brackish water for cooling, it is proximate to good fiber connectivity and carbon sequestration resources, and it is governed by an exceptionally friendly Texas regulatory regime.
What's more, the Delaware land is far away from any population center, removing community apprehension as a barrier to development.
LandBridge's surface acreage is "open for business," says Capobianco, meaning any potential digital infrastructure partner can expect rapid support in the development of data centers, including proprietary water infrastructure developed by LandBridge, which processes some 4 million barrels of water daily across the Permian. Cooling capabilities have become more and more critical as new technology, such as Nvidia's Blackwell chips, runs hotter and hotter.
Capobianco describes the opportunity for renewable energy in the Permian as important but not sufficient on its own. Because hperscalers are locked in an "existential" battle for data center development, the more consistent energy provided by bountiful West Texas natural gas is in high demand. He says the only renewable energy capable of fully powering a data center is nuclear.
He also details the business plan of LandBridge, which makes money from land leases as well as power margins and some mineral rights. Capobianco predicts well-suited land in the Permian and elsewhere will "re-rate" now that investors recognize a net new source of revenue in the form of digital infrastructure.
Says Capobianco: "The need is great, the race is on."
 
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Actis' Sustainable Strategy in Digital Infrastructure

Private equity firm ⁠Actis⁠ is building data centers around the world while maintaining strict standards around sustainable energy, water and social impact. And the firm's impact is about to get bigger. Actis and General Atlantic recently merged to create an $87 billion investment platform, with Actis focused on the huge opportunity in sustainable infrastructure, largely in growth markets across Asia, Latin America, Africa and Eastern Europe.
 
Digital infrastructure is a significant part of the investment mandate for Actis, with 17 offices across the world. The firm draws on its on-the-ground expertise in real estate, renewable energy and infrastructure to tackle the many burgeoning opportunities in data centers, wireless towers and fiber.
In a wide-ranging interview, Thomas Liu and James Magor, Partner and Director, respectively, describe a global build-out of data centers in global growth markets, most of which have not previously offered data center sites to hyperscaler customers. Each market has a very different regulatory regime, but most favor data sovereignty, and are led by governments aware of the developmental benefits that digital infrastructure can bring to their economies.
Driving the development are expansion-minded hyperscaler customers like Amazon and Microsoft, which are locked in a competition for AI dominance around the world. Liu notes these hyperscalers need local partners with insights into local regulations, and the ability to maintain relationships of trust with local communities. For example, Actis has taken a successful digital literacy program from its operations in Nigeria and started using it to engage with communities across Asia.
Liu and Magor discuss Actis' recent investment in Epoch Digital, a diversified data center platform with developments planned in South Korea, Malaysia and Taiwan. Magor says the importance of resilient building techniques was highlighted by a recent Taiwanese typhoon that hit Epoch's construction site there.
Liu explains the benefits of merging with General Atlantic, including an expanded investor base and the ability for Actis to draw on General Atlantic's deep relationships with TMT customers across the world.
Visit the Cool Vector website here: ⁠https://coolvectormedia.com/

Equinix vs. Digital Realty: A Fitch Analyst Talks Data-Center REITs

Data center real estate investment trusts (REITs), like Equinix and Digital Realty Trust, differ from traditional REITs in their higher operational intensity and reliance on artificial-intelligence tailwinds for growth, says Harold Chen, Director of Commercial Real Estate at Fitch Ratings.
Chen, whose team has assigned investment-grade ratings to Equinix and Digital Realty, says the companies benefit from surging demand related to AI. Of the two, Digital Realty has a higher concentration of hyperscaler customers, defined as big-tech, data-center customers like Microsoft, Mega and Amazon. The upside of hyperscaler concentration is longer-term leases, while the downside is customer concentration and the inability to more frequently reprice rent rates, says Chen, adding data center REITs have a history of only single-digit customer churn. Data centers that cater to co-location customers tend to have shorter leases, he says.
Data-center REITs also differ from traditional REITs in their "significantly higher levels of operational intensity," says Chen. Complexities like power, cooling and interconnectivity make data-center REITs "significantly different beasts."
Chen also discusses with Cool Vector the impact that ESG and sustainability initiatives have on Fitch ratings, and the historic challenge for data center companies to access certain forms of financing, like asset backed securities (ABS).
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Why Comp is Surging for Digital Infrastructure Investors and Operators

"I kid you not. . . at least once a week, I've got a conversation going with somebody who sits in digital infrastructure private equity, and they say to me, 'If you know somebody, or a team, that does XYZ in the data center space, let me know. I'd love to meet them, because that is the type of business model that we could put hundreds of millions, if not not billions, into.'"
 
The amount of private capital available for deployment in digital infrastructure investments is far outpacing the supply of operational talent necessary to put it to work. Patrick Reyes, a Principal at infrastructure-focused executive search firm, ⁠One Search,⁠ says large private equity and infrastructure firms eager to enter the digital infrastructure asset class often have deeply researched ideas about where to invest, but lack the platform company or management team to executive the strategy.
 
Reyes shares these observations in the Cool Vector episode, "Why Comp is Surging for Digital Infrastructure Investors and Operators."
Cool Vector website: ⁠https://coolvectormedia.com/⁠

Partners Group Got the AI Timing Just Right

Partners Group was already bullish on AI when, in 2022, the firm invested $1.2 billion in EdgeCore Digital Infrastructure. Then the debut of ChatGPT a few weeks later blew to lid off their initial assumptions of growth.
In the post-ChatGPT world, the hyperscaler market served by EdgeCore saw an "explosion of demand for capacity," says Diffendal who, in a wide-ranging interview, explains the criticality of strong management in responding to the unexpectedly strong leasing activity.
Two years later, the growth of EdgeCore Digital Infrastructure was such that "we basically ran out of money," says Diffendal. In September, Partners Group raised another $1.9 billion in capital, much of it in the form of co-investment from limited partners, institutional investors who had many questions about power availability and exit opportunities.
Diffendal also discusses the imperative of keeping the data centers powered to a "five-nines" (99.999%) standard of up-time, to avoid getting financially penalized by "demanding" hyperscaler customers. As investors in data-center hub Northern Virginia, Diffendal describes the general shortage of all forms of labor there, including electricians.
Partners Group's original thesis was that data centers would benefit from the tailwinds of cloud computing, video and AI. Diffendal adds: "I really think we're just at the very beginning of understanding what the commercial implications of AI will be."
Visit the Cool Vector video-podcast website: https://coolvectormedia.com/

Building Scale in Wireless Towers, Fiber and Data Centers

A conversation with Omar Jaffrey, founder of digital infrastructure private capital firm ⁠Palistar Capital⁠, which is currently investing from a $1.9 billion fund.
Jaffrey gives a grand tour through the digital infrastructure investment opportunity, in which he says builders of scale will have advantages in winning customers. He cautions that some investors confuse the full stack of technology, services and human capital involved in the telecommunications industry with core infrastructure, the later of which has a history of more consistent performance.
Among other topics, Jaffrey also makes the case for the long-term durability of infrastructure hard assets, comments on the pressures faced by potential sellers of wireless rooftop and tower assets, and explains the many options for revenue streams that owners of many towers can realize.
Cool Vector website: https://coolvectormedia.com/

The Fiber Optic Future With John Siegel of Columbia Capital

John Siegel, a Partner at private equity firm Columbia Capital, offers a deep dive into the physical assets necessary to power an AI-driven internet, including the fiber optic cables that connect the growing population of data centers around the world, and the nations jockeying for position to build digital infrastructure hubs.
In a wide-ranging conversation, John shares his views on the demand drivers of information sharing, including not only AI but the massive proliferation of devices that connect to the internet. He details the data center build-out across Asia and explains why governments are so eager to develop hubs like his home base in Northern Virginia.
A long-time telecom investor and "qualified bull," John also shares his analysis of a wave of bankruptcies in the early 2000s (which lost billions for private equity investors) and what lessons these might have for the current digital infrastructure build-out.
 
About Cool Vector
Cool Vector is a video-podcast created to chart the rise of data centers and the digital infrastructure asset class. On a regular basis, the podcast will convene expert conversations about the investment opportunities and macro themes driving the build-out of digital infrastructure, including private capital dynamics, performance expectations, energy demand, geopolitical influences, sustainability opportunities, development and construction, technology and community impact.
Cool Vector is hosted by financial journalist David Snow, a long-time chronicler of the alternative investment market. This interview should not be considered investment advice or a solicitation to invest, and the views and opinions expressed herein are those of the speakers and do not necessarily reflect the views or positions of any entities they represent.
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Watch this interview on the Cool Vector YouTube channel: YouTube

How Energy Became 'Existential' to Data Centers

Digital infrastructure has a voracious appetite for energy, but the electric utility industry is filled with apprehension and lacks 'muscle memory' to 'build big things,' according to Brian Janous, co-founder of sustainable energy specialist Cloverleaf Infrastructure, as well as the former head of data center energy for Microsoft.
In a wide-ranging interview with Cool Vector, Janous describes how his mandate at Microsoft went from relative obscurity to a top-order concern among the company's leadership. He discusses how data center sites are identified, evaluated and the importance of finding a willing counter-party in the local utility.
Janous also discusses the importance of community engagement, the risks of project delays and regulatory lags, the dominace of solar as a form of renewable energy for data centers, and the criticality of long-term power purchase agreements.
 
About Cool Vector
Cool Vector is a video-podcast created to chart the rise of data centers and the digital infrastructure asset class. On a regular basis, the podcast convenes expert conversations about the investment opportunities and macro themes driving the build-out of digital infrastructure, including private capital dynamics, performance expectations, energy demand, geopolitical influences, sustainability opportunities, development and construction, technology and community impact.
Cool Vector is hosted by financial journalist David Snow, a long-time chronicler of the alternative investment market.
 
Watch Full Episodes of Cool Vector on YouTube and Spotify.

Cool Vector: A New Video-Podcast About Data Centers and Digital Infrastructure

Financial journalist David Snow introduces Cool Vector, a new video-podcast that will chart the rise of data centers and the digital infrastructure asset class.
On a regular basis, Cool Vector will convene expert conversations about the role that institutional investment capital will play in the build-out of digital infrastructure around the world, and focus on the overlapping long-term trends of digitalization, the rise of private capital, changing energy demand, changing land and real estate use, innovation in sustainability, national security, and many other topics.
Full video episodes of Cool Vector will live on the Cool Vector YouTube channel as well as the major podcasting platforms like Spotify. Clips of each episode will be promoted on LinkedIn, Instagram and TikTok.
The Cool Vector video-podcast homepage is here: https://coolvectormedia.com/