American data centre provider Equinix has sold its London (LD10) and Paris (PA8) data centres to a new joint venture (JV) 80 percent owned by Singapore’s sovereign wealth fund GIC. Equinix holds the remaining 20 percent equity stake. The move comes amid a striking admission that “customers’ requirements differ from what we provide today”.
The $1 billion Equinix-GIC joint venture will provide a capital vehicle to build and expand hyperscale data centres under Equinix’s new “xScale” brand.
The decision comes amid rampant demand for massively scalable, highly connected data centres to serve leading cloud providers, as workload migrations to the cloud continue to grow. Investment will start with six “xScale” data centres in Europe.
The move comes as analyst Mitul Patel from CBRE told Computer Business Review that hyperscale demand was “bigger than anything we’ve ever seen” and demands different requirements from data centre operators like Equinix that may have specialised in smaller amounts of capacity to a wide range of customers, via massively connected sites focussed on building an ecosystem of customers, rather than huge cloud contracts.
Referring the xScale launch, Equinix’s Chief Strategy and Development Officer, Eric Schwartz, said: “Hyperscale data centers are characterized by tens of thousands of square meters of floor space, filled with thousands of compute and storage systems and massive amounts of networking capacity. While we have met a limited amount of these requirements in our IBX data centers to date, the strong growth in demand for capacity, coupled with our recognition that the customers’ requirements differ from what we provide today, led us to define a new class of facility to address this demand.”
The announcement came the same day that ratings agency Fitch upgraded all of Equinix’s ratings to investment grade; its second investment grade upgrade following S&P Global Ratings’ upgrade to BBB-/stable outlook in February.
Hyperscale Dominates: CAPEX Requirements are High
Demand for massively scalable data centres is growing massively, but also requires huge capital outlay. Another major co-location data centre operator earlier told Computer Business Review that it had shocked even financier George Soros’s family office with its capital requirements for a greenfield hyperscale data centre.
The JV launch comes as Google, Microsoft, Amazon, Apple and Facebook together accounted for 70 percent of hyperscale CAPEX over the last 10 quarters, according to market research company Synergy. Cloud companies now account for some 81 percent of all co-location up-take, according to CBRE’s Patel.
Equinix’s Eric Schwartz wrote in a company blog: “Initially, the joint venture will own and develop six xScale data centers for hyperscale providers in Europe to meet the strong demand for hyperscale data centers in that region. Equinix data centers in London and Paris will be transferred to the joint venture, and already have a significant portion of their space under lease.”
He added: “Four new xScale data centers are expected to be developed in Amsterdam, Frankfurt (two sites) and London…Our development and construction teams are working on additional xScale opportunities in other markets around the world. As these projects take shape, we have the opportunity to add those facilities to this joint venture or to create additional joint ventures for those facilities depending on the specific circumstances of the new projects.”
Equinix Joint Venture: Facilities Will Serve “Unique Core Workload”
In a release, GIC and Equinix said: “The initial facilities in the joint venture will serve the unique core workload deployment needs of a targeted group of hyperscale companies, including the world’s largest cloud service providers.”
“The facilities, on or proximate to some of Equinix’s existing IBX campuses, will allow these key enablers of digital transformation to streamline their continued growth, while strengthening Equinix’s leadership position in the cloud ecosystem, as enterprises increasingly embrace hybrid multicloud as the IT architecture of choice.”
Upon closing of the JV, GIC will have contributed cash to fund its 80 percent equity interest and Equinix is expected to have transferred its LD10 and PA8 IBX assets and “certain development investments” in return for net cash proceeds and a 20 percent equity interest in the JV.
“It Has Been a Long Journey”
Charles Meyers, President and CEO, Equinix: “It has been a long journey to reach this point, but we are tremendously excited to announce the formation of our first xScale data centers joint venture.”
“Partnering with a world-class investment partner like GIC will provide the opportunity to make significant capital investments in order to capture targeted large-footprint deployments while continuing to optimize our capital structure. The JV structure will enable us to extend our cloud leadership while providing significant value to a critical set of hyperscale customers. We look forward to launching similar JVs in other operating regions and believe that these efforts will continue to further differentiate Equinix as the trusted center of a cloud-first world.”