Investment strategy: What key factors does Apollo consider when evaluating potential investments in data centers, and how do these factors influence your overall investment strategy in this sector?

We consider a range of factors when we evaluate potential data center investments, including size and intended use, lease counterparty and terms, site and location, power availability and load ramp, engineering and development, construction management, procurement strategy and status, and ongoing operations management. Consideration of all these factors is key to identifying attractive investment opportunities, mitigating risk and aligning the right capital to each opportunity.

Apollo has a fully integrated investment platform spanning the full risk-reward spectrum, from investment-grade to commercial real estate, structured credit, hybrid and private equity. One of our key differentiators is our ability to provide innovative capital solutions across the capital structure. In the data center space, our insurance balance sheet is particularly well suited to be a scaled provider of capital to high-quality opportunities in the sector, given the long contracts and long-lived nature of the assets. For this capital base, we focus on large hyperscale campuses primarily in tier 1 and tier 2 markets with long-term leases with creditworthy counterparties and power certainty. Other opportunities may be a fit for internal pools of capital that have higher risk and return targets. But our core strategy in the space focuses on aligning our capital base, structuring expertise and preference for long-term partnership to potential opportunities.

Risk management: In your view, what are the primary risks associated with the data center industry, including the rapidly growing energy needs and the evolving regulatory landscape? How do you mitigate these risks?

We see five primary risk categories in data center investments: power availability and certainty, project delivery and cost overruns, lease structure and tenant creditworthiness, capital markets and availability of capital, and long-term asset value. Power risk is acute, given interconnection backlogs and utility timelines, so we underwrite firm power agreements and delivery schedules, with credible paths to bridging or on-site generation where needed. Delivery and cost risk are carefully evaluated, including with third-party diligence, and managed with guaranteed maximum price contracts, owner-furnished, contractor-installed procurement, and bonding and insurance coverage. We address regulatory and community risk through priority for entitled sites and markets with clear paths to approvals. Lease and tenant risk is mitigated by pre-leasing to investment-grade hyperscalers on long-term triple net leases, landlord step-in and lender protections, and a focus on termination rights. The contemplated scale of development may also test the depth of data center financing markets, which rely on construction financing for development assets and short-duration financing in the asset-backed securities and single-asset/single-borrower commercial mortgage-backed securities markets once stabilized, which also carry refinancing risk. We have a natural mitigant to this risk in our long-term insurance capital that allows us to finance on a longer-term basis to align capital pools with asset life. The rise of AI training and inference-focused data centers has also raised questions about long-term asset value after the initial contracted period for these more specialized assets, which sit outside core cloud regions. Some of these data centers are also being developed by new developers, for neoclouds, in new regions and/or at a scale where force majeure risks and insurance coverage become key considerations.

Sustainability: How is Apollo integrating environmental considerations such as emissions and water usage into its data center investment strategy?

Incorporating sustainability risk/opportunity considerations relevant to investment performance is an integral part of our process. Data center investments present unique environmental and social considerations that could influence operating costs, capital requirements and revenue resilience. We focus on drivers such as power efficiency and sourcing, water and cooling design, and physical climate risk. Our assessment includes an evaluation of energy efficiency and energy sourcing strategies since power is the largest operating expense and a key determinant of margin stability. We also examine how data centers source, use and recycle water, recognizing that cooling design can materially influence utility costs, regulatory exposure and resilience in water-stressed locations. We favor water-light designs (e.g., waterless or closed-loop) and consider water risk where air-cooled chilled water is necessary in hot or water-stressed markets. Additionally, we review data center exposure to physical climate risk events — including hurricanes, floods, heat stress and wildfires — to evaluate the potential for operational disruptions, additional capital expenditure requirements or insurability challenges. We prefer low-hazard locations where risks are moderate and vetted by diligence alongside tracking via sponsor/tenant reporting.

Looking ahead: What do you see as the biggest challenges and opportunities for Apollo in the data center financing landscape over the next five years? Do you see asset allocation concentration limiting your appetite for the asset class?

Over the next five years, we see two parallel realities: power and delivery constraints will unwind but continue to pace supply, even as hyperscaler demand compounds, and traditional take-out markets will struggle to absorb mega-campuses at scale and duration. That creates a financing gap we’re well suited to fill, and we believe the Apollo/Athene ecosystem is uniquely positioned as a potential capital provider across the market. Apollo’s capital base, coupled with our creative structuring expertise, is a natural fit to the sector to provide rapid and certain execution at scale. Markets for stabilized asset financings and sales are still in their early innings and will need to absorb large volumes and heavy concentrations of counterparties. Traditional take-out markets will be capacity-constrained for mega-campuses, creating a persistent gap for private investment-grade solutions. We think that bespoke, privately originated, investment-grade financing will be part of the capital solution to meet the increased demand for AI-related infrastructure, including data centers, semiconductors and power generation, given the unique characteristics of the asset class: Data centers are long-lived, durable assets that generate predictable cash flow through leasing arrangements with creditworthy counterparties. Due to the flexibility and duration of capital that can be offered by private investment-grade solutions, developers and tenants can creatively finance many of these projects by utilizing off-balance sheet and nondilutive capital to reduce balance sheet leverage and support credit ratings. We have meaningful deployment goals for the asset class and do not view asset allocation concentration as significantly impacting our appetite. We have significant capacity for single-asset and single-tenant investments in the space, but we will manage exposure broadly by diversifying by tenant and market/power region, as well as risk across construction and stabilized assets.