As pandemic taxes connectivity, GI Partners sees ripe environment for investment

The pandemic lockdown revealed something about our modern society: internet connectivity is almost as important as food and shelter.

Almost. Connectivity is probably just under the big three: food, water and shelter. And something became apparent with millions of Americans at home relying on local network infrastructure for their livelihoods – back-end network infrastructure could use a lot more upgrading.

That’s where GI Partners comes in. The firm recently closed its debut Data Infrastructure Fund on $1.8 billion. It raised the majority of capital before the pandemic hit, but still had to finalize some commitments remotely, according to Philip Yau, managing director with GI Partners.

“This is one of the things that really hit home through the covid pandemic that we’ve all been dealing with, how absolutely essential it is and the differentiator in our lives between having real quality broadband access at your fingertips and not,” said Mark Prybutok, managing director and co-head of GI’s data infrastructure group.

The data infrastructure team focuses on several themes: data storage, transportation, wireless access and technology-enabled infrastructure. Storage and transport are big areas of focus now, while tech-enabled devices, such as smart homes and smart buildings, will likely be more significant in the future.

5G wireless is an incoming technology as well and the firm sees opportunities to invest in the infrastructure being set up to handle the upgraded technology.

“There’s a whole bunch of infrastructure that will enable 5G and a whole bunch of smaller and medium companies in the US that are enabling this,” said Steve Smith, managing director and co-head of GI’s data infrastructure team.

GI Data Infrastructure Fund so far has made two investments in Hawaiian data center operator DR Fortress and Blue Stream Fiber, which provides broadband, video and voice services in south Florida.

The strategy is generally perceived as infrastructure-like, so the return profile is more in line with infrastructure funds rather than buyout, Yau said. The investments also are generally held longer than traditional buyouts, Prybutok said. Other firms that target such investments include Stonepeak Infrastructure Partners, Brookfield Infrastructure Partners and Digital Colony.

“We’re investing in capital intensive businesses and a lot of our investment is going to be characterized by … ongoing organic growth strategies,” Prybutok said.

The data infrastructure team has 13 dedicated investment professionals and is led by Prybutok and Smith, former CEO and president of data center company Equinix. Prybutok formerly worked at Alinda Capital, where he led the telecom infrastructure strategy.

Prybutok and Smith have been able to tap their networks, along with GI’s, which has invested in data infrastructure for years, as a way to source opportunities. While the pandemic has impacted the team’s ability to assess targets in-person, executives have done some limited traveling and expect to do more moving forward.

“There’s a lot we can do remotely, more than we ever thought possible we can do remotely and frankly every industry in every line of business is seeing that,” Prybutok said. “At the end of the day, we still do need to see the people that are going to run these businesses face-to-face if we’re making investments of several hundred millions of dollars.

“Having the opportunity to see the assets physically and understanding the markets in which they’re operating by physically going to them is an important part of the business.”