KKR and Dallas-based Compass Datacenters have signed a definitive agreement in which the investment giant will inject money into a number of Compass’ existing data centers and future facilities.
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The deal, first reported by Bloomberg, is expected to total “several billion dollars,” although the exact figure hasn't been revealed. Compass had reportedly been seeking suitors to sell a stake in its stabilized data center portfolio, an effort to recycle capital to fund future development.
KKR’s investment in Compass is far from its first foray into the data center space. In 2022, the firm acquired data center operator CyrusOne in a take-private deal valued at $15B. KKR this year partnered on a $4B data center campus in Texas with Energy Capital Partners as well as a major platform-level partnership in the Middle East with Gulf Data Hub.
In January, KKR and a Canadian pension fund acquired a $2.8B stake in a trio of power transmission companies to help fund the build-out of new infrastructure needed to meet surging electricity demand from data centers
Through its deal with Compass, KKR is buying into a portfolio with assets across a number of primary global markets, including Northern Virginia, Chicago, Dallas, Phoenix, Milan and Tel Aviv. Compass launched a period of aggressive expansion following its acquisition by Brookfield and Ontario Teachers Pension Plan in 2023 — a deal that valued it at $5.5B.
Compass has a number of campus-scale projects underway. These include a development on the site of the former Sears headquarters outside Chicago, an eight-building, $10B project in Meridian, Mississippi, and a proposed 333-acre campus in Statesville, North Carolina, announced in August.
The company is also one of the firms attempting to build data centers as part of the contentious Digital Gateway plan in Prince William County, Virginia, although the future of that development remains uncertain amid a legal dispute.
In the past, Compass has turned to structured debt to capitalize its existing, fully leased data centers to fund new development. In October, it was reported that the company was preparing a deal to raise $326M through asset-backed securities backed by five properties. It was the fourth such debt issuance from Compass.
Compass’ use of structured debt, as well as its deal with KKR, comes as data center developers are having to get increasingly creative to turn their stabilized assets into cash.
Despite unprecedented investor interest in the sector, potential buyers for these fully leased data centers are few and far between — a product of their multibillion-dollar price tags and comparatively low returns. While new buyers for stabilized data center inventory are expected to emerge, for now, developers’ need to monetize their stabilized assets is leading them to use a series of new debt and equity structures that are transforming the industry’s capital markets landscape.
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