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New Data Center Fund Seeks to Raise $1.5B and has Seattle Among its Targeted Markets

ICONIQ Capital, Iron Point Partners, IPI Partners II, Silicon Valley, Seattle, Mexico State Investment Council

By Jon Peterson 

The impact of COVID-19 on technology in the homes and across all factors of our life has made data centers ever more important as a backbone of our industry and overall global economy. Two firms, San Francisco-based ICONIQ Capital and Iron Point Partners, which has offices in Dallas and Washington, D.C., are seeking to make a considerable investment in this area and are looking to tased $1.5 billion of capital raise for its new data center fund that goes by the name of IPI Partners II. Their efforts were confirmed by sources aware of the firms’ fund-raising initiatives.

The commingled fund is planning to consider at a number of markets across the country as possible investment locales. Included in that list are both Silicon Valley and Seattle, but other areas where the fund wants to invest include Portland, Chicago, Dallas, Atlanta, Columbus, Ohio and Northern Virginia.

One of the most recent new investors into Partners II is the New Mexico State Investment Council, which allocated $100 million to the fund, according to information provided by the sovereign wealth fund. ICONIQ and Iron Point will both act as sponsors of the fund on a 50/50 basis.

The commingled fund is targeting to purchase assets that can produce net IRRs in the low double-digit range over a 12-year life term utilizing moderate leverage. The deals for the fund could include investing in single assets or small portfolios that would total as many as three properties. The planned holding period for each asset in the fund is six to eight years.

Partners II will be looking at three different types of transactions from a risk perspective. Some deals will be considered core transactions consisting of long-term leases to credit tenants in primary data center hubs. Another portion of the portfolio will be allocated to value-add investments where lease up, lease renewal management or capacity expansions are necessary. And the third strategy will focus on build-to-suit development of data center properties.

The development part of the portfolio could make up as much as 50 percent of the fund, although the main product type for this portion of the fund allocation would be shell space where the tenants would build or install the data center infrastructure themselves.