Azrieli Group is spending $780 million on the construction of a new data center in Norway for the use of controversial social media app TikTok. Specifically, the center will be built for TikTok Norway AS by Azrieli subsidiary Green Mountain, which the firm acquired in 2021 for $850 million. Azrieli said the customer will be provided with a total power capacity of 90 MW. The complex will form part of the customer’s European hub.
The data center campus is to be made up of several buildings that will be built in several stages. The first 30 MW are expected to be supplied already in Q4/2023 under an 11-year contract. The remaining capacity of 60 MW will be supplied in two further stages in 2024 under 10-year contracts. The customer has been given several options to increase the capacity by dozens of MW more.
What is interesting here is that Azrieli is taking a big risk on TikTok at a time when governments continue to express concern over how the firm’s Chinese owners use the personal data belonging to users. American politicians are moving to pass new laws that could ban TikTok the app outright, but, at the very least, the U.S. government is expected to ban its use by any of its numerous employees. And the EU can’t be far behind.
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It’s not just the abuse of a user’s personal data to sell to advertisers, without even informing the public of what is being done as was the scandal that arose with regards to Facebook and Google. Here, governments are concerned that since TikTok is a Chinese firm its app is being used as some sort of “back door” to access secret information.
However, this transaction is expected to generate average annual NOI of some $79 million, given full operation (90 MW).
Upon acquisition of the Norwegian company Green Mountain which is, as aforesaid, wholly owned by Azrieli Group, the group set the goal of expanding its presence in the European data center market, and using the strong platform it acquired to establish a foothold and expand in this market. This deal is an important step in the implementation of this goal through engagement with a leading global customer.
As of its Q3/2022 statements, Azrieli Group’s data center segment accounted for some 15% of the group’s total assets. This transaction is expected to triple the segment’s NOI upon full operation, excluding completion of the many projects under development.
Eyal Henkin, Azrieli Group CEO, said: “This deal is a significant step in the development of our data center business and expansion of our presence in Europe. This project joins our development pipeline in this segment, which is expected to significantly increase in the coming years upon completion of the many projects under development. Green Mountain is establishing itself as a key player in the European market, and this deal is expected to constitute another step in the development of this significant segment in Azrieli Group’s portfolio. In this context, the company is exploring various possibilities for collaboration with investors in its business in this market”.