Macquarie buys its 1st Korean data center for $538 mn

Macquarie Korea Infrastructure Fund (MKIF) has signed an agreement to buy a 40-megawatt (MW) data center from Seoul-based IGIS Asset Management Co. for 734 billion won ($538.4 million), the South Korean infrastructure arm of Macquarie Group said last Friday.

The hyperscale data center in Hanam, about 10 kilometers (6.2 miles) from the eastern edge of Seoul, has 41,919 square meters of floor area and 12 stories. Korean mobile platform giant Kakao Corp. rents 92% of the space while LG Group’s information tech unit LG CNS Co. rents 8%.

MKIF plans to complete transactions around the middle of September. If closed, the deal will mark the first development and sale of a domestic data center by a Korean real estate firm. 

“We see rising demand for data centers as they are the core infrastructure assets for growth of generative artificial intelligence and cloud services and upward trend in outsourcing,” said Macquarie Korea Asset Management Co. (MKAM) Representative Director Suh Boum Sik.

“We forecast growing demand for Hanam IDC from corporate clients as the asset is located in the Seoul metropolitan area, where stable communication networks are available and securing additional water sources is challenging,” Suh added.

The main Kospi-listed fund will spend a total of 918 billion won including the purchase price, remaining construction such as building mechanical, electrical and plumbing (MEP) systems and some financing costs. It has chosen to take the additional burden in exchange for lowering the valuation of the data center, said investment banking sources.

MKIF will fund 423 billion won, comprising of 400 billion won in subordinated loans and 23 billion won in equity, and raise 495 billion won in senior loans, sources added.

The infrastructure fund manager has reduced the cap rate to the low- to mid-6% range by lowering the asset price and taking the construction and financing costs. MKIF forecasts the reduced valuations should work in its favor for additional data center deals, according to the sources.

More data center deals in Korea are expected over the next few years as IGIS, Koramco Asset Management Co., Samsung SRA Asset Management Co., Actis and Pacific Investment Management Co. are slated to put their digital infrastructure assets on the market.

Write to Byeong-Hwa Ryu at hwahwa@hankyung.com

Jihyun Kim edited this article.