July 18, 2019
AZRIELI GROUP
Investing in the Data Centers Industry
2
Disclaimer
The information included in this presentation is merely a summary. It does not exhaust all the information about the Company and/or Compass Datacenters LLC (“Compass”) and their business, and it is not a substitute for inspection of the Company’s periodic and immediate reports, as filed and to be filed with the Israel Securities Authority via the Magna distribution site. The presentation is not an offer or invitation to purchase securities of the Company and/or of any other corporation, nor is it arecommendation or option or any substitute for the investor’s discretion. In any case of discrepancy or inconsistency between the information in this presentation and the information in the Company’s reports on Magna, the information in the reports shall prevail.
This presentation includes forecasts, objectives, assessments, estimates and other information relating to future matters and/or events whose materialization is uncertain and which lie beyond the Company’s control, and constitute forward-looking information, as defined in the Securities Law, 5728-1968. Such information (which includes, inter alia, forecasts of output, NOI, EBITDA, yields and projected leverage) may not materialize, in whole or in part, or may materialize in a materially different manner than projected. The above information is based solely on the subjective assessment of the company, based on facts and figures regarding the current state of Compass’ business and macroeconomic facts and figures, all as known to Compass at the time of preparation of this presentation. The materialization or non-materialization of the forward-looking information willbe affected, inter alia, by risk factors that characterize Compass’ business, as well as developments in the economic environment, market conditions and external factors that affect its business, including a delay in the completion of sites underconstruction and development, termination of contracts, changes in the competition conditions, a significant recession, change in the financing conditions, and other such events which cannot be assessed in advance and which are beyond Compass’ control. The Company does not undertake to update and/or change any such forecast and/or assessment to reflect events and/or circumstances occurring after the date of this presentation.
This presentation includes information about the Data Centers market and other information that is based on external sources and various studies and surveys, which were not independently checked by the Company. Keep in mind that past results are not necessarily an indication of future performance.
The financial information about the Compass deal takes into account another acquisition of business by Compass, closing of which is expected by the end of July 2019.
3
Azrieli Group // Opportunity in the Data Centers industry
The Group made a decision to enter the global Data Centers industry
The board of directors and management of the Group believe that the industry fits the Group’s
investment strategy
One of the world’s fastest growing income-producing property markets
The tenants are among the world’s leading companies
The Group has been thoroughly studying the market for about two years
A decision was made to enter the field according to the outline specified below, consisting
primarily of:
An investment in equity, with an option to increase the holdings, in a platform with
significant future development and enterprise potential
4
What is an Azrieli Group growth engine
A field with potential to become a significant operating segment for the Group
Core business activity – income-producing property
A sizeable, significant and growing industry
Attractive yields
An industry that combines enterprise with an advantage for financial strength
The Global Data Centers Market
6
Data storage development
The 1990s
Increase in the scope of use of “server-client” IT architecture
in large organizations
The early 2000s
Sharp growth in number of internet users
Now
Projected increase in consumption of online content
0.4
2
4
2000 2010 2018
Internet users worldwide, in billions
96122
151186
228
278
2016 2017 2018 2019 2020 2021
Monthly online information traffic, ExaBytes
(1)
(1) 1 Exabyte = 1 Million TeraByte = 1 Billion GigaByte(2) Source: Clipperton Finance, Cisco
7
The global market is estimated to generate annual revenues of approx. $91 billion.
By 2022, the market is expected to grow at an average annual pace of approx. 35%, totaling annual
revenues of approx. $307 billion.
The U.S.A. is positioned as the global market leader: About 60% of the data centers capacity is located
North America, 20% in Asia-Pacific, and 13% in Europe.
The market growth is led by the global cloud companies, and is driven mainly by the growth of the data
industry by both business and private entities.
Global DC market breakdown (% in MW)
(1) Source of data: CMA Strategy Consulting, RBC, Structure Research(2) UK, Germany, France, Ireland, the Netherlands
Data Centers // Opportunity in the Global Market (1)
Industry growth factors
Cloud
AI
IoT (Internet of Things)
Augmented reality
5G networks
Smart transportation
Crypto Currencies
$23 $32 $47
$69
$99
$137
2015A 2016A 2017A 2018E 2019E 2020E
Public Cloud ($bn)
61%
3%
12%
1%
20%
2%United States
Canada
Major Europe
Other Europe
APAC
LATAM
(2 )
8
Data Centers // Characteristics
Income-producing real estate, a building housing
computers and servers of companies of various
types
Includes hardware for processing, storage,
switches, etc.
High-standard security requirements, very high
redundancy in terms of power, latency, systems,
control and safety
Property location of significant importance,
according to the following parameters:
– Close to communication networks
– Located and power sources
– preferably in cold locations with low power
costs
Main characteristics
Lease is based on power units rather than area
units
Measurement unit: KW
Types of tenants:
– Hyperscale (>5 MW)
– Wholesale (300 KW – 5MW)
– Retail (Multi Tenants) (<300 KW)
Tenants and Leases
9
Data Centers // Customer breakdown
Types of customers
Hyperscale -Wholesale Retail
10
The U.S. market is shifting to outsourcing solutions Key North American markets in terms of capacity and development
Growth in the number of Hyperscale Data Centers
338 386448
509570
628
27%32%
38%44%
48%53%
2015A 2016A 2017A 2018E 2019E 2020E
# of Hyperscale Data Centres % Share of Data Centre Servers (Installed Base)
Data Centers //
The Changes and Expected Growth in the Market
(1) Source: CMA Strategy Consulting, RBC(2) Source: Industry Research, Cisco Global Cloud Index: Forecast and Methodology, Statista, Gartner, BI Intelligence(3) Source: IDC, Worldwide Datacenter Installation Census and Construction Forecast, 2019–2023, Doc #US43797219 , Apr 2019The analysis includes datacenters only (without server closet and server rooms)
Assists companies in focusing on their core business
Increase in costs and complexity of in-house DC
management increases attractiveness of outsourcing
More companies will “lease” comprehensive IT services
from cloud providers, and transfer the task of building and
maintaining their IT infrastructure to a limited group of
specialist experts.
2019 2022 2019 2022
Critical MW Critical MW 3-YR CAGR MW/YR Rank Rank
Northern VA 1,393 1,946 11.8% 184 1 1
Dallas 693 826 6.0% 44 2 2
Las Vegas & Reno 593 659 3.6% 22 3 4
Chicago 573 714 7.6% 47 4 3
Silicon Valley 519 651 7.8% 44 5 5
New Jersey 516 580 4.0% 21 6 6
Houston 383 424 3.4% 13 7 10
Atlanta 376 460 6.9% 28 8 7
Los Angeles 374 427 4.5% 18 9 9
Seattle 325 363 3.8% 13 10 11
Phoenix 317 441 11.6% 41 11 8
New York 295 320 2.8% 8 12 12
55%
45%
88%
12%
Internal Data Centers Service Providers
2013 2019Internal Data Centers: -10%
CAGR )2013-2023):Service providers: +24%
Main drivers for increasing demand for Outsourced services
1,998 2,109 2,216 2,329 2,475 2,584 2,698
198 234 291 317 352 393 441
476 486
497 516
541 560
580
506 530
571 593
615 637
659
539 590
639 693
741 782
826
420 472
520 573
621 670
714
427 446
469 519
565 609
651
788
949
1,235
1,393
1,572
1,754
1,946
5,353
5,816
6,439
6,933
7,482
7,990
8,514
2016 2017 2018 2019 2020 2021 2022
Uti
lize
d M
W
Northern VA
Silicon Valley
Chicago
Dallas
Las Vegas & Reno
New Jersey
Phoenix
Others
CAGR )2018-2022)
11
(1) Source of data: CMA Strategy Consulting
The forecast includes the deployment of Retail Colocation (<300KW) in addition to Hyperscale and Scale
Data Centers // U.S. capacity increase forecast
7.2%
Forecast
(1) Source of data: Wall Street Research, Structure Research, RBC
Total Infrastructure Forecast Mix
Hyperscale cloud providers rely increasingly on third-party wholesale providers to develop their capacity to support growth
8% 6%
9%
77%
Colocation Hyperscale/ Cloud
Managed Infrastructure On-Premise
12%
34%
11%
43%
Colocation Hyperscale/Cloud
Managed Infrastructure On-Premise
2017
2022E
Data Centers // The Global revenues development forecast
12
30.846.8
70.2103.9
153.0
224.4
28.9
33.1
38.0
43.9
50.5
58.0
9.8
11.6
14.0
16.9
20.3
24.4
$69.5
$91.5
$122.2
$164.7
$223.8
$306.8
2017 2018E 2019E 2020E 2021E 2022E
Hyperscale Retail Wholesale
($ in Bns)
Outsourced Infrastructure Global Forecast
% Growth 32% 34% 35% 36% 37%
Data Centers // U.S. Market Characteristics
Customers
Duration of contracts
Rent(2)
13
Large cloud service providers, communication companies, etc.
Medium-sized businesses – banks, airlines, etc.
5-10 years1-3 years
8%-12%10%-20%
Hyperscale: US$ 90-120 kW/Month
Wholesale: US$ 110-140 kW/MonthUS$ 150-250 kW/Month
Hyperscale / WholesaleRetail
(1) Source of data: CMA Strategy Consulting, RBC(2) Gross modified. According to the company’s and CMA’s assessment, the cost of construction of 1MW is in the range of $6-8 million.
Yield-on-cost (2)
The Compass Deal
15
Azrieli Group // The Go To Market Approach
Long term (Steady State) leverage of 50%-60%
A reasonably-priced active platform & experienced management (1)
Existing and future operations in the Wholesale/ Hyperscale segment
Developing a significant installed base in a mature market
Land and development pipeline in attractive locations for future growth
Local partner
(1) The importance of relationships and acquaintance with key customers, mainly in the Hyperscale and Wholesale markets
16
Azrieli Group // Compass Deal
10 active sites, 3 sites under construction and development
Active mainly in the central-eastern U.S and in Canada in the Montreal region.
The Company’s management is experienced in the development and establishment of data centers and
relationships with strategic customers.
The DCs are located close to power lines and high voltage and fiber line infrastructure.
Description of the Company
Data centers in the U.S.A. and Canada
3 Hyperscale Deployments
8 Stabilized Campuses
Minneapolis(2 Facilities)
Nashville(2 Facilities)
Tulsa(1 Facility)
Dallas(2 Facilities)
Raleigh(1 Facility)
Montreal(2 Facilities)
2 Facilities in Montreal Canada
Phoenix(Campus Build)
Dallas Fort Worth(Campus Build)
Northern Virginia(Campus Build)
The partners
Ontario Teachers’ Pension Plan– Ontario teachers’ pension fund, one of Canada’s largest institutional investors
RedBird Capital Partners - Investments are focused on communications infrastructure, sports & hospitality,
energy, and financial services.
Compass management – decades of experience in the initiation and management of Data Centers.
(1) Option to increase holdings up to 33% according to current value against future investments in development.
Ownership structure
17
Azrieli Group // Compass Deal
19.5%
23.7%
2.3%
54.5%
July 2019
Management
33%
Management
(1) (1)
Expected Dec. 2020
18
Management
Compass management – decades of experience in the initiation and management of server farms.
Jared DayPresident & CFO
20+ years of experience
Raymond HawkinsCRO
30+ years of experience
Adil AttlassyCTO
30+ years of experience
Nancy NovakSVP construction
30+ years of experience
Chris CrosbyFounder & CEO
25+ years of experience
Proferian
Construction
Executive
ConstructionStrategy & operationsSalesFinanceCEO
Azrieli Group // Compass Deal
$ 38 MillionCurrent(1) NOI Annualized
~30MWCurrentoutput
~7 years Average
lease term
~ 560MWPotential
output in the long term
Current income-producing outputNOI for 100%
Duration of existing contracts
Future development potential
(1) Included signed but not yet closed agreements.
19
(1) For Large cloud companies.(2) The time tables, actual size and marketing of the projects are uncertain.
Azrieli Group // Compass Deal
Compass’s facilities
10 Active facilities3 Hyperscale(1) facilities under
development(2)
~30MW ~ 120MW ~ 560MW
$ 201 Millionnet debt
Existing debt in acquired company
40%-50%projects in pipeline
Projected leverage
Current producing output
Additional short-term output pipeline
Total potential output in acquired assets and land
20
Summary // Trends in the Data Centers Market
The data revolution has created a reality where Data Storage and Data Processing are growing at increased speed and size
Cloud development causes businesses to opt for intensive hardware outsourcing
Consequently, the Data Centers market is growing at a high pace, and presents an opportunity to develop a new growth engine
The yields in the Data Centers market are considerably higher than other traditional real estate sectors
“Stickiness” – Due to the sensitivity and materiality of the matter, companies tend not to make frequent changes in their server farms and
databases, leading to long-term contracts and little turnover
21
22
Summary // An Opportunity for Azrieli Group
Consistent with the Group’s strategy –real estate development
A new and growing business segment
Income-producing real estate with attractive yields
A growth engine in a significant global market
Significant potential operating segment
Thank you
Top Related