AREP Closes Oversubscribed Fund at $309M
The company’s latest investment vehicle will channel most of its financial strength into data centers.
American Real Estate Partners has closed its fourth real estate GP fund, AREP Strategic Opportunity Fund IV at $309 million in equity commitments.
AREP stated that the amount reflects “significant growth” since it closed fundraising for its third investment fund, in 2022. Fund IV is AREP’s largest fund to date and relied in particular on institutional investors and high-net-worth individuals.
The new fund will focus on what AREP sees as “transformative opportunities in high-demand sectors,” mainly data centers and residential real estate—and predominantly the former. AREP intends to allocate 80 percent of Fund IV to expanding PowerHouse, AREP’s data center platform, to capitalize on the ever-growing demand for digital infrastructure.
This emphasis builds on a transition from office buildings into data infrastructure that AREP began around 2016, with its reported $212 million acquisition from Verizon of the 136-acre Quantum Park, in Ashburn, Va.
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AREP’s previous funds, the company said, focused on a value-add/opportunistic strategy and became the basis for AREP’s long-term data center strategy.
AREP did not reply to Commercial Property Executive’s request for additional information.
Tough growth for data centers
Nationally, the data center sector is marked by the confluence of rising demand for capacity, driven by digital services, cloud computing, AI and 5G, and a record level of construction activity, according to a recent outlook from CBRE.
Despite the pace of construction, CBRE forecasts, the data center market will face challenges in keeping up with demand, driving higher utilization of existing facilities and reducing vacancy rates. In 2024, the average vacancy rate for primary markets fell to a record-low 2.8 percent and the average preleasing rate of new construction hit a record high, according to the report.
Based on that, CBRE expects average preleasing to hit 90 percent or more this year, alongside “rental rates rivaling the record highs of 2011-2012.”
CBRE’s outlook singles out five markets—Northern Virginia, Silicon Valley, Dallas–Ft. Worth, Atlanta and Chicago—as regions with greater competition for land and power.
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