Apollo real estate secures first Europe deal

The New York firm has exchanged contracts to buy a £60m data centre in London in its first deal in Europe since taking over Citi Property Investors last November.

Apollo Global Real Estate, the property arm of the New York-based alternatives firm, has made its first investment in Europe since taking over Citi Property Investors (CPI).

The company, which completed the takeover of CPI in November last year, has exchanged contracts to buy a data centre in London’s Clerkenwell district for £60 million (€68 million; $98 million) from a group of private owners.

Apollo’s strategy is understood to involve quadrupling power to the property under an agreement with a utility company and to take vacant possession of the building next year in order to strip down and upgrade the data centre ready for occupation by a new tenant.

Bank finance is yet to be arranged for the transaction so in the meantime the New York-listed firm has agreed to buy the asset from its balance sheet.

Data centres are often considered a niche play, however the asset class has attracted fresh investment from private real estate firms in recent times. A notable example came in May this year when Matterhorn Capital, a London-based firm, expanded its data centre arm by investing £250 million in two sites in southeast England.

Recent research published by Microsoft suggests that annual global spending in data centre construction will increase from around $50 billion to $78 billion by 2020.

The maiden Europe deal by Apollo follows a decision to enter into real estate a few years ago. It now manages real estate assets totalling around $6.5 billion. Helping that figure, in addition to the acquisition of CPI, was the launch of AGRE US Real Estate Fund, a closed-end private investment fund targeting real estate-related investments principally in the US.

Earlier this month, it announced the formation of a $400 million real estate investment fund to purchase, renovate and reflag full-service hotels across the US as the latest part of its global real estate drive.