Specialist European digital infrastructure manager DTCP has reached a final close on the second vintage of its flagship fund, Digital Infrastructure Vehicle II, raising €1.12 billion through DIV II and a further €440 million in co-investment capital. The €1.56 billion total is still €40 million shy of the €1.6 billion target set solely for the fund, when it launched in 2021.
The targeted gross IRR for DIV II is 15-20 percent and target net IRR is 10-15 percent. As of November 2023, DIV II was generating a 13.8 percent net IRR, while its predecessor fund, Digital Infrastructure Vehicle I, had an 18.5 percent net IRR, according to documents seen by Infrastructure Investor. DIV II will have a fund life of 12 years with up to three years extension.
The fund’s investment thesis will thus be core-plus and focus on the European mid-market, targeting ticket sizes of €150 million-€250 million, or €500 million with co-investment. The core target sectors are mobile networks, fibre networks and data centres. DIV II’s portfolio will be half brownfield, half greenfield, with a focus on passive infrastructure in a ‘build and expansion’ phase, the documents stated.
DIV II reached a second close on about €1 billion in August 2022. It had raised the bulk of the fund (€1.1 billion) by November, having deployed about 75 percent of the of capital across four assets by then, totalling close to €830 million. Investments include Dutch mobile tower provider Cellnex NL (a €396.5 million equity investment for a 38 percent ownership stake), a JV with KKR in Dutch open access fibre network ODF (€150 million for 20 percent ownership), Belgian mobile tower land aggregation group Asteria (€86 million for 84 percent ownership) and German green data centre platform Maincubes (€190 million with a €295 million co-investment for 65 percent ownership).
“Co-investments are a fundamental aspect of DTCP Infra’s strategy… [they] enable us to engage in larger, more significant deals,” Vicente Vento, managing partner, chief executive and founder of DTCP, told Infrastructure Investor. “While specific investors’ details remain confidential, it is noted that the majority of the participants in the Maincubes co-investment are also investors in the DIV II flagship fund.”
He noted that this was not a strategic shift from DIV I. “DIV II has been thoughtfully sized and structured to allow fund investors significant and direct participation in the deals, thus providing asset allocators with priority access to distinctive dealflows in a cost-efficient manner,” he added.
DTCP declined to disclose which asset, or assets, the remaining €165 million in DIV II’s sidecar co-investment vehicle pertained to.
DTCP also declined to comment on whether or not the Asteria deal had reached full financial close and if this deal includes any level of co-investment. The deal was agreed in Q4 2023.
DIV II will seek a total of six to eight portfolio companies. When asked which investments may come next for the fund, Vento responded: “DTCP Infra is currently focusing on the significant rise in demand for data centres, spurred by the advent of artificial intelligence… Additionally, we remain keen on investment opportunities in our core focus areas of mobile towers and fibre networks, as well as related sectors such as land aggregation.”
DTCP was founded in 2015 as a spinoff from Deutsche Telekom, which initially served as the GP’s sole LP for DIV I and now functions as an anchor investor for DIV II. As such, DIV I closed in 2017 on €200 million, deploying €159.3 million of that across six assets: Sunrise Towers, Cloudreach and Cellwize (which have been exited as of November 2023) alongside Keepler, Community Fibre and Fiber Experts (all unrealised as of November 2023). The remaining funds have been reserved for “follow-on investments in existing portfolio companies”, according to the firm.