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Digital Colony backing up LATAM strategy with deep pockets

Being a relative newcomer to the broad infrastructure sector, US fund Digital Colony has set itself the challenging task of becoming the biggest digital infrastructure player in Latin America

SAO PAULO – February 9th, 2021 – In order to achieve that, the fund, which was founded in 2017 when Colony Capital acquired Digital Bridge Holdings, built a multi-billion reserve for greenfield projects and inorganic growth in three key areas: fibers, towers and datacenters.

Considering only direct allocations in these segments – the company also makes co-investments – Digital Colony has a pot of around US$30bn earmarked for investments.

“We’ve been pivoting to conduct a transformation from a traditional real estate company [which was the focus of Colony Capital] to the new digital real estate, comprising fiber, towers and datacenters,” Marcos Peigo (pictured), Digital Colony’s operating partner in Latin America, told BNamericas.

Peigo, who joined Digital Colony last April from IBM, is also the CEO of the Digital Colony datacenter subsidiary Scala, created to focus on the group’s datacenter projects in Latin America.

The company’s datacenter business model is based on hyperscale and collocation projects, building data infrastructure from the ground up to provide space, energy supply and high-speed connections to accommodate servers and storage from large cloud service providers, such as AWS and Google.


Scala was officially formed with the acquisition of Brazilian firm UOLDiveo’s collocation assets by Digital Colony last year for 2.3bn reais (US$429mn).

With the acquisition, Scala took over two datacenters: SP1, with approximately 25MW of total capacity, and SP2, with capacity of 7MW, both located in the São Paulo metropolitan region.

Scala is now expanding its footprint by building five datacenters in the region: one in Mexico, one in Colombia, one in Chile and another two in Brazil. Construction works on all of them are set to begin this year.

In Brazil, SP3 is forecast to go live in June, which should bring the total production capacity in Brazil to 50MW this year.

SP3 is a hyperscale and single-tenant datacenter – that is, for a single customer. Peigo did not reveal the name of the client, but it is likely to be either AWS or Oracle.

According to Peigo, it will be the first datacenter in Brazil with Tier III certification issued by TIA 942, which, unlike Tier III certifications by Uptime, observes not only electrical aspects, but also mechanical ones, including telecommunications and physical security

Peigo also says that 100% of the energy used in all Scala’s facilities is renewable and certified by the International REC Standard.

In addition to SP3, another project to be launched in Brazil this year is SP4.

Unlike SP3, it will be a multi-tenant site and is slated to go live in December. SP4 will have 25MW of capacity and focus on the large enterprise ecosystem.

Five of the building’s 10 datarooms are already pre-leased to current Scala customers, who will expand their capabilities.

The other five rooms are under negotiation. Talks are underway with large companies such as operators that no longer want to have their own datacenters due to cost issues, as well as with IT outsourcing companies looking to consolidate their datacenters in a kind of hosting collocation. “These are companies that provide datacenter services to other companies, but which have their assets spread out,” the executive said.

In addition to SP3 and SP4, Peigo confirms that construction is set to begin next year on the SP5 and SP6 projects in the same area.

SP5 will be a 40MW building, reportedly the biggest capacity center in Latin America, and it will have a hyperscale profile like SP3.

SP6, in turn, will be a follow-up to SP4 with the same multi-enterprise profile. It will have up to 12MW of capacity.

In addition to these SP datacenters, Scala intends to develop two other availability zones in São Paulo state, with at least one more greenfield datacenter each, to be inaugurated in 3Q22.

In total, the company estimates that it will reach 200MW in total capacity in Brazil just 2.5 years after its creation, with sufficient land and substations to allow it to reach 400MW, according to the executive.

But, in addition to the projects in Brazil, Scala has also confirmed projects for six other Latin American datacenters, according to Peigo.

Two of them will be set up in the Santiago region of Chile.

One of these sites is in more advanced stage of development. It will be a singletenant and hyperscale center. The company is already in negotiations with a major client.

In addition to those two datacenters in Chile, two others will be built in the Querétaro region of Mexico and two in Bogotá, Colombia. The plan for 2021 is to begin construction of one datacenter in each country.

Scala is focused on rivals such as Equinix, Ascenty and Odata, all of which are also investing in these nations.

“We arrived a little late in these countries compared with other players. But our investments are robust and well-calculated. We’re not going to the same [data availability] zones as the rest. We will create new zones,” said Peigo.

Scala also has a partnership for the construction of modular datacenters for edge computing. These will be connected to the core datacenters the company is building across the region through fiber optics, which is another focus of the group’s investments.

All of the investments are aimed at the long term.

“We’re just starting an investment journey. I don’t have to look for profitability now. We’ve already purchased profitable assets. I have reasonably positive cash generation and Ebitda to allow me to continue financing our moves. We’re in no hurry. The hurry is to continue buying good assets.”


A second pillar of the group’s business is the tower segment, including small cells and distributed antenna systems (DAS).

Digital Colony has three major investments in the region in this segment: Mexico Tower Partners (MTP), the largest private wireless tower operator in Mexico; Andean Telecom Partners (ATP), which operates fiber and towers in Chile, Peru and Colombia; and Highline do Brasil, focused on the Brazilian tower business.

Highline was bought in 2019, Andean Telecom Partners (ATP) in 2017 and Mexico Tower Partners in 2013, through Digital Bridge.

In December 2017, ATP announced the acquisition of Torres Unidas (TU) from Berkshire Partners. The purchase added 1,644 sites to ATP’s portfolio, making it the largest privately owned tower company in the Andean region.

Mexico Tower Partners, in turn, has now 3,000 sites deployed in 32 Mexican states.

Acquired from Pátria Investments in December 2019, Highline do Brasil became Digital Colony’s main investment vehicle for towers and fibers in Brazil.

In late 2020, Highline made two new M&A moves, entering into a definitive agreement to acquirePhoenix Tower do Brasil (PTB) from funds managed by Blackstone and snapping up over 600 sites (towers) from Brazil’s Oi for 1bn reais (US$186mn).

Digital Colony currently has around 6,600 towers in Latin America in its portfolio, according to Peigo. Globally, the group has 350,000 tower sites, 35,000 small cells and DAS and 241,000km of fiber optics, in addition to 125 active datacenters, he added.


Fiber is the third pillar of the three-pronged digital infrastructure strategy pursued by Digital Colony to interconnect its towers and datacenters and serve industries looking to automate and digitize.

Digital Colony is battling investment bank Banco BTG’s Economia Real fund for Oi’s fiber assets.

Last week, Oi announced that it had entered into exclusive talks with BTG for the fiber deal. This puts the bank closer to securing preferential status (stalking horse) in the auction for 51% of the Brazilian operator’s fiber network, scheduled to take place in the first quarter of this year.

Digital Colony is not out of the running, but with preferential status BTG will be able to cover any other offer made. Nevertheless, Peigo does not believe the game is over yet. “We always go into these competitions to win,” he said.

Source: BNAméricas