“Historically, when a significant amount of capacity is brought online in sectors like this, there is a tendency for overbuilds in certain areas,” deVeer explained. “Being selective and cautious in our development approach is crucial to navigating this landscape.”
Major alternative asset management firms, such as Blackstone Inc., Brookfield, Apollo Global Management Inc., and Ares, have increasingly turned their attention to data center projects as a lucrative opportunity to capitalize on the growing demand for processing power driven by the rise of artificial intelligence. These investments are viewed as a more stable avenue to participate in the AI surge compared to the volatile nature of AI stocks.
Ares recently announced ambitious fundraising goals, particularly focusing on data center investments and its wealth management division. The firm aims to raise over $8 billion in equity to support data center projects in key markets like London, Japan, and Brazil in the near future. Additionally, Ares has raised its wealth business fundraising target by $25 billion, setting a goal of $125 billion by 2028.
Ares, traditionally focused on financing data centers through its credit arm, successfully raised $2.4 billion in the first half of the year for these facilities and has established a dedicated fund for digital infrastructure investments in Japan. The acquisition of GLP Capital Partners Ltd.’s operations outside of China last year, for up to $5.2 billion, significantly expanded Ares’ real estate assets and enabled the company to engage in direct data center development initiatives, deVeer noted.
Emphasizing the importance of strategic positioning in challenging markets with scarce entitled land, deVeer highlighted Ares’ focus on constructing high-quality facilities to attract investment-grade tenants like hyper scalers, facilitated by the expertise of the in-house team acquired through the GLP deal.
Ares’ strategy primarily revolves around pre-leased developments with long-term lease agreements of 15 years or more, including rent escalators, to mitigate long-term risks. Insurance capital could potentially be utilized to finance these investments.
The firm also aims to raise $70 billion for alternative credit by 2028, anticipating substantial growth in the secondary market for discounted sales of secondhand private market funds, encompassing credit, private equity, and infrastructure, over the next five years.
With $7 billion invested in continuation vehicles, which enable fund managers to transition private stakes into new funds, Ares is strategically positioning itself for further growth and expansion in the market.
Exploring opportunities to engage retail investors, Ares is supportive of initiatives, such as President Donald Trump’s executive order in August, aimed at facilitating the inclusion of alternative assets like private equity, real estate, and cryptocurrency in retirement plans like 401(k)s. DeVeer expressed interest in expanding Ares’ product offerings to cater to the growing demand in these channels.
