Goodman Group, the Australian industrial property giant, is making a hard pivot to data centres as its CEO warns of a looming wave of mergers and asset sales among debt-laden private equity-backed competitors. Greg Goodman, founder and chief executive, said in a rare interview that the scale of private equity leverage fueling the data-centre explosion is causing growing concern.
Unsustainable debt burdens
Goodman highlighted that the rising refinancing costs of billions of dollars of debt are unsustainable. He predicted forced asset sales that will ultimately leave a smaller group of better-capitalized players. "There'll be consolidation around the world," the billionaire said. "You'll see less data centre developers and operators." The scenario is expected to unfold over the next two to four years, though Goodman declined to identify specific vulnerable companies.
Private equity models under scrutiny
Goodman questioned the viability of private equity models in the sector. "Look at all the private equity models," he said. "There's billions and billions of refinancing required just to keep these things sustainable. When does enough become enough for some of the big banks?" His comments echo broader doubts about credit markets, with JPMorgan Chase CEO Jamie Dimon recently calling out rival lenders for doing "dumb things."
Global data centre boom
Goodman Group, which started with a single industrial building in Sydney in the 1990s, is building a global network of data centres from Los Angeles and Paris to Tokyo and Hong Kong. The company is among many racing to provide infrastructure for the artificial intelligence boom, which is expected to consume trillions of dollars. Globally, data centre construction starts surged from about US$60 billion in early 2020 to US$340 billion by 2025, according to MSCI Real Capital Analytics.
Challenges ahead
Goodman noted that infrastructure challenges are intensifying. Rising power prices and energy security have become bigger considerations for bankers financing AI infrastructure. The Iran war is adding to the strain on power grids and swelling construction costs. "Infrastructure is not getting easier," he said. "It's getting harder." In the Asia-Pacific region alone, approximately US$800 billion of data centre investment is expected by 2030, according to a Deloitte report.
Refinancing needs
Examples of large debt refinancing include Bain Capital-owned Bridge Data Centres, which has engaged banks for a potential new loan of up to US$6 billion. BDC and DayOne Data Centers Ltd. are looking to double last year's facilities to at least US$5 billion and as much as US$7 billion, respectively. Goodman's warning suggests that not all players will survive the coming consolidation.
