GI Partners pays $14.7 million for south Phoenix data center land

GI Partners paid $14.7 million for 5.4 acres south of Phoenix with a data center in mind, and the seller earned that price without building anything: the site sits beside an APS substation that LKY says it spent years working with the utility to expand for exactly this use, and Phoenix has concluded a data center would be allowed there. Connect CRE, which reported the purchase, relays that determination but gives no closing date.

The land basis prices that groundwork: LKY paid $3.15 million for the parcel in 2012, according to the Phoenix Business Journal via Connect CRE, and the $14.7 million sale clears at roughly 4.7 times that basis, or about $2.7 million an acre for ground south of a metro with no shortage of ground. LKY Development Company's business is acquiring and entitling subdivisions and master-planned communities—selling permitted ground rather than raw dirt—and the spread here is what years of coordination with APS and the city were worth to a buyer that needed both already done.

The buyer already operates in the asset class: GI Partners runs private equity, real estate and data infrastructure strategies, keeps a Scottsdale office among a handful of others, and says it has raised more than $49 billion from institutional investors worldwide. PRED records list $35.7 billion in regulatory assets, a narrower yardstick than capital raised. Data infrastructure is one of three named strategies at the firm, so this is an operator buying the asset class it already underwrites, in the metro where it already operates.

Industrial pricing set the clearing number here across the operator, the land basis and the data-center demand. The buyer carries the strategy in-house, the basis is roughly 4.7 times its 2012 mark, and the demand is a substation expansion that took years of utility coordination to arrange. On a per-acre read, the land is a line item a sponsor can afford to get wrong, likely a small fraction of what the building will cost, and that is exactly why the scarce part of the project was bought before construction capital showed up.

$2.7 million an acre will look cheap or irrelevant in five years depending on what APS energizes next.