On the heels of closing its fourth infrastructure fund, Northleaf Capital Partners is reviewing several data center and rail opportunities for its next deal, said a source familiar with the firm’s thinking.

Northleaf executives are evaluating situations where undercapitalized data center developers or existing platforms require growth capital.

On 13 May, executives announced that Northleaf Infrastructure Capital Partners IV (NICP IV) had surpassed its target of USD 2.25bn and reached the hard cap of USD 2.6bn.

From the fund, executives expect to deploy an average equity investment of USD 250m. It took the Northleaf team a little over two years to raise the fund, confronting challenges early on in 2023 when the well-advertised “denominator effect” slowed LP commitment pacing.

In that scenario, the public equities portion of LPs’ portfolios declined in value. At the same time, illiquid asset valuations drifted higher in relation, even though the actual amount invested in those assets remained constant. This forced LPs to pull back from further private equity commitments.

However, over the last seven to eight months, fundraising efforts gained momentum, providing NICP IV with the impetus to close at the USD 2.6 billion figure.

Opportunity abounds

There’s certainly no shortage of such situations in the age of AI and cloud.

Whether it’s hyperscale, wholesale colos, or retail colos, the industry has demonstrated a rapacious appetite for capital over the years as cloud computing demand has shown no signs of slowing, while enterprises quickly adopt AI applications.

Among the 10 largest projects from a capex and financing standpoint in 2024, between energy and infrastructure, five were data center initiatives, according to Infralogic data.

CyrusOne secured the top spot with a USD 7.9bn capital raise last July, and Coreweave raised USD 7.5bn in debt almost precisely a year ago.

Northleaf has had a controlling stake in Vault Data Centers since 2019.

Rail, too, has seen some activity this year, with two North American M&A deals closing, representing half of the total for 2024, according to Infralogic data. That volume still pales in comparison to the heyday in rail dealmaking of 2022, when eight transactions were closed.

Northleaf is looking in Europe and the US for rail opportunities, the source said.

Fundraising environment

Investors and advisors have become somewhat upbeat about the global infrastructure fundraising environment, with just under USD 65bn in final close from 21 funds. That is 44% higher than the period last year when USD 39.8bn was raised by 20 funds, according to Infralogic’s Q1 fundraising report.

The report’s findings also revealed that on average, fundraises take about 30 months to complete, with 2024 peaking at 31.4 months, compared to the average of 23.1 months for 2020-2023. There has been a marginal improvement in 1Q25 with this dropping to 30.3 months, but the long timeframes remain a burden.

This squares not only with NICP IV’s timeframe but also fellow mid-market investor Ridgewood Infrastructure. That firm took roughly 35 months to close on its Ridgewood Water & Strategic Infrastructure Fund III.

Now, Northleaf will spend the next 18-24 months looking to reach another five to seven deals for NICP IV. Presently, the fund has Provident Energy Management, Tillman Fiberco, EV Passport, Combined Cargo Terminals and Shared Tower companies as portfolio holdings.

Northleaf declined to comment on follow-up questions.