Azrieli to sell stake in US data centers firm for about NIS 3.2 billion

The Azrieli Group announced on Tuesday that it has entered into an agreement for the sale of its stake in US data center firm Compass Datacenters for about NIS 3.2 billion ($900 million).

The announcement comes as Dallas, Texas-based Compass Datacenters, in which Azrieli has a 32.5% stake, is being bought up by Brookfield Infrastructure Partners L.P. and existing investor Ontario Teachers’ Pension Plan at a company valuation of $5.7 billion. The Israeli real estate developer is selling its stake in the data center firm as part of the transaction. Azrieli shares rose 4% at the close in Tel Aviv.

Azrieli said the deal should have a material impact on its earnings as it expects to record a pretax gain of about NIS 1.3 billion ($360 million) from the sale once the transaction is completed. The sale reflects an annual shekel return on investment of 40.4%, the group said in a statement. Azrieli owns and develops office complexes, shopping malls, senior homes, data centers, mixed-use properties, hotels and long-term rental residences, both in Israel and abroad.

As part of its growth strategy, Azrieli back in 2019 bought a 20% stake in Compass for $135 million, representing its first investment in the North American data centers market. Compass Datacenters designs and constructs data centers for some of the world’s largest cloud services providers and organizations on campuses primarily in North America and EMEA.

“The realization of the group’s minority holdings in Compass reflects a return of 2.5 times on the investment in a duration of 2.3 years, at a price that constituted an excellent opportunity… and is expected to yield a profit of hundreds of millions of dollars,” said Azrieli CEO Eyal Henkin. “The expected cash flow from the transaction will serve the group in developing its areas of activity and further strengthen the group’s financial stability.”

In 2021, Azrieli further expanded its operations in the data centers market with the acquisition of Green Mountain for NIS 2.8 billion ($770 million) to gain a foothold in Europe. The Norwegian company plans and constructs server farms in Norway, Germany and the UK.

Azrieli said it plans to continue to develop the operations of its data centers segment and seeks to enter into transactions to expand to additional European countries and increase the backlog of deals in Norway with leading hyperscale customers.

“I believe in this significant growth engine, and the Group will continue and deepen its activity in the field through Green Mountain,” said Dana Azrieli, chairwoman of the Azrieli Group.