Data centre valuations ‘stable’ despite AirTrunk bonanza, says NextDC chief

NextDC chief Craig Scroggie. Picture: Mark Cranitch

AirTrunk’s blockbuster sale to private equity giant Blackstone is unlikely to reset valuations across the broader data centre industry, NextDC chief executive Craig Scroggie says.

But the deal underlines the insatiable investor demand led by the world’s largest pension funds and private equity houses.

Mr Scroggie, who heads up Australia’s largest homegrown data centre operator, says it’s difficult to make an assessment about the price paid by the Blackstone-led consortium, given AirTrunk’s financials are privately held.

“The value is made public, but how it’s made up, or how it’s determined, is difficult for anyone to try and understand,” he said.

“I’m not sure you can draw a valuation logic from a private company to a public company in the absence of having the actual financials to make a comparison.

“But it shows that there is relentless demand for digital infrastructure and data centres and continued competition globally for capital.

“The world’s largest pension funds and the world’s largest digital infrastructure funds continue to aggressively seek out data centre investments.

“There are not a lot of quality data centre companies, and your ability to be able to get ownership of a multibillion-dollar platform – they do tend to be few and far between as far as quality businesses are concerned.”

AirTrunk chief executive Robin Khuda joined ASX-listed NextDC as deputy chief executive in 2010, cutting his teeth under Mr Scroggie before founding AirTrunk in 2016.

On Wednesday NextDC opened its 16th Australian data centre – the $100m-plus A1 facility in Adelaide designed to support South Australia’s defence, space, health, transport, education and manufacturing industries.

The company also operates data centres in New Zealand and Japan, and has 10 facilities in planning across Australia and in Malaysia.

Mr Scroggie says that despite being one of the few remaining pure-play data centre operators listed on public markets globally, the company’s ASX status provides access to the capital needed to deliver its growing pipeline of new facilities.

“There’s very few public data centre companies left in the world,” he said.

“The desire for people to want to take them private, given the amount of capital that they need to grow, they tend to be well suited to the big global pension funds that continue to accumulate money and need to deploy and invest billions of dollars every year. Data centres and digital infrastructure are a great place to do it.

“We invested $1bn last year, we’ll invest $1.1bn this year, and that continues to grow. And being on the ASX allows us to continue to grow and raise capital when we need to.”

In the US, data centre firms CyrusOne and Switch were taken private in multibillion-dollar deals in 2021 and 2022, while CoreSite was acquired by US real estate investment trust (REIT) American Tower.

NextDC, which is valued at about $9.7bn, was trading 3.3 per cent lower on Wednesday at $16.02.