Centuria to acquire 50% in next gen data centre provider

Australasian real estate fund manager, Centuria Capital Group (ASX: Group or “Centuria” or “Group”), is set to acquire¹ a 50% interest in a new-generation data server provider, Reset Data Pty Limited (ResetData), for a consideration of up to $21 million², which expands the Group’s revenue stream into a new business line providing significant revenue growth potential.

Centuria’s early mover advantage into Liquid Immersion Cooled Edge Data Centres is a dual PropCo (Property Company) and OpCo (Operating Company) acquisition. Centuria gains a complementary and highly scalable real estate-based business segment that differentiates its funds management platform at an OpCo level.

Centuria’s investment aims to harness tailwinds from the growth in data storage and Artificial Intelligence (AI) with the global cloud service market expected to exceed US$2.2 trillion by 2032 (17.1% CAGR) and Australian cloud services expected to reach in excess of A$23.2 billion in 2024 (+19.3% compared to 2023)³.

ResetData relies on proprietary Liquid Immersion Cooling (LIC) technology for its data centres, which provide a smaller size footprint than traditional data centres, less energy consumption than those using air cooling servers, and a reduced carbon footprint. These features enable ResetData to be located in existing office buildings, rather than outer city warehouses, delivering lower connectivity latency to users.

Jason Huljich, Centuria Joint CEO said, “We are looking to build AI factories of tomorrow with the LIC technology enabling deployment of cloud-based technologies in less space, requiring fewer resources and with a significantly reduced carbon footprint. Most importantly, this is technology that fits within existing office floorplates while generating significantly higher rents per square metre compared to typical office occupants.

“A critical consideration in entering the ResetData investment opportunity is the value creation potential we see across our direct and listed real estate portfolios. Centuria’s investment in ResetData enables the Group to unlock value from vacancies within our office portfolio by establishing a network of edge data centres that can service tenants as well as other businesses in proximity. Depending on asset suitability, Centuria expects that the acquisition will provide opportunities to enhance rental streams and property valuations for our property funds, in addition to providing our tenants with access to local cloud storage with enhanced ESG credentials.”

ResetData has existing partnerships with Dell, Nvidia, Submer and Unicom Engineering to provide Original Equipment Manufacturer (OEM) capabilities for liquid immersion cooling technology.

A 2.4 sqm LIC pod produces 140kW, meaning 100 sqm of ‘white space’ within an office floorplate could potentially house up to 1.5 MW of capacity. In comparison, a traditional 1.5 MW data centre would require approximately 1,000 sqm of white space.

The LIC system benefits from a reduced carbon footprint, with zero water waste compared to c.13,000GL per annum for air cooling systems. LIC also provides a 31% reduction in carbon costs.

John McBain, Centuria Joint CEO added, “We view our early investment in ResetData as presenting an early mover opportunity in a rapidly growing sector, providing new revenue growth and a point of difference for Centuria’s real estate platform. Centuria’s corporate acquisition strategy seeks real estate market opportunities that provide strong tailwinds and limited competition, similar to our investment in real estate private credit back in 2021 with our initial investment in Centuria Bass Credit.”

Bass Salah and Marcel Zalloua, ResetData Joint CEOs said, “This is an exciting opportunity to partner with a leading $21 billion Australasian real estate funds manager, which provides the means to scale our new generation data centre offering throughout Australia and New Zealand, beginning with 818 Bourke Street, in Melbourne – This will be one of Australia’s first Liquid Immersion AI inferencing and ultra high-density data centres.”

ResetData has entered a 10-year lease⁴, for up to 1.5 MW, in the Centuria-managed 818 Bourke Street, Docklands, owned by Centuria Office REIT (ASX: COF). The premises will be transformed into one of Australia’s first AI inferencing and ultra high-density LIC data centres. This transaction has the potential to lift the properties’ valuation⁵ by 10-15% net of costs.

Centuria’s investment in ResetData will be funded with Centuria’s existing debt headroom and is expected to be earnings neutral in FY25 and accretive to OEPS from FY26 onwards.

1.  Binding agreement executed, expected to close in August or September 2024
2.  $6.25 million will be paid upfront, $10 million will be invested as working capital as required and the remaining $4.75 million will be paid subject to ResetData meeting earnings hurdles in FY25 and FY26. Centuria has a call option from the end of year five to acquire the remaining 50% of ResetData
3.  Precedence Research
4.  Subject to electricity provider’s finalisation of gross power availability to the building and conditional on local planning approval
5.  Indicative valuation uplift based on internal assumptions for electricity availability and planning approval. The valuation of the building remains subject to unforeseen circumstances and material changes in operating and market conditions