Report: Macquarie Seeking Stake in Netrality Data Centers

Data Center Frontier

September 03, 2019

Rich Miller

Global infrastructure fund Macquarie is reportedly close to expanding its data center holdings. Bloomberg reported Friday that an affiliate of Macquarie is nearing a deal to buy a stake in Netrality Data Centers, which operates carrier hotels and data centers across the United States. The financial news service characterized the talks as “advanced.”

Netrality is a real estate company built atop the power of the cross connect – the physical connection between networks that knits the Internet together.

Netrality was launched in 2015, with a vision for acquiring carrier hotels and upgrading their interconnection infrastructure to boost the flow of data between carriers, network operators and content specialists.

Macquarie’s interest in the data center sector is part of its growing focus on digital infrastructure. Macquarie Infrastructure Partners (MIP) is also a major investor in Aligned Energy, providing the financial resources to help the company expand its data center footprint and executive team, and innovate in data center construction and sustainability.

This morning it was announced that Macquarie Infrastructure Partners has acquired Bluebird Networks, a telecom and fiber provider serving the Midwest United States.

Recent investments by Macquarie and other infrastructure funds like Brookfield Infrastructure and Stonepeak Infrastructure Partners have the potential to speed the industrialization of the data center, streamlining the delivery of capacity to support the growth of cloud computing.

Funds like Macquarie have traditionally invested in projects like airports, utilities and toll roads, but are now shifting their focus to digital infrastructure, citing extraordinary demand for capital to fuel the shift to a data economy.

Carrier Hotels in Focus

Netrality is a joint venture between Amerimar and industry veteran Hunter Newby, and has acquired buildings in Philadelphia, Chicago, Houston, Kansas City and St. Louis. The company, named for its focus of networks and neutrality, is creating advanced meet-me rooms in each property.

Meet-me rooms are common areas where providers can make connections between their networks. These interconnection facilities can be operated by building owners, non-profits or commercial service providers.

The Bloomberg report comes in a period of active investment in carrier hotels.

  • In April, American Tower bought Colo Atl, a colocation and meet-me room business in downtown Atlanta, saying it saw the investment as an opportunity to evaluate connected colocation as a future growth opportunity.
  • Equinix  acquired the Dallas Infomart for $800 million last year, and is investing an additional $138 million to add a second building at the property. Equinix is also investing $60 million in an expansion of the NAP of the Americas in Miami, the primary carrier hotel in south Florida.
  • DataGryd has just completed is new space within 60 Hudson Street, the most prominent carrier hotel in Manhattan.
  • A 2017 renovation at One Wilshire, the leading carrier hotel in Los Angeles, brought infrastructure upgrades that will add up to 28 megawatts of power capacity for the 30-story building.

Carrier hotels were the early cornerstones of the Internet economy, and some of the most successful properties in the colocation industry. A key piece of the business model is the meet-me room, a common area where providers can make connections between their networks. Interconnection facilities can be operated by building owners, non-profits or commercial service providers.

The term “carrier hotel” dates to the Telecommunications Act of 1996, which cleared the way for competition in the telephone and Internet business. The act cleared the way for competitors to access the network by colocating infrastructure within the Bell companies’ facilities. Shortages of access and trust prompted the newcomers to a new strategy: leasing space in buildings adjacent to the incumbents’ central offices in major cities. Dozens of carriers and network operators soon bought up space inside buildings like 60 Hudson Street in Manhattan and One Wilshire in Los Angeles, coining the term “carrier hotel.”

Earlier this month Bloomberg reported that CyrusOne was considering a potential sale, but no transaction has materialized.