Mizrahi Tefahot Bank is lending NIS 410 million to Anan Data Centers. Behind the venture are PAI, owned by singer Omer Adam and his family; Adam’s business partners, brothers Maor and Snir Melul, owners of real estate company H.S.M Europe-Israel Investments; and Nessim-Sariel Gaon’s Swiss-based Lian Group. The consortium plans to construct a large server farm adjacent to Kibbutz Tsor’a beside Road 38. The consortium will contribute equity of NIS 150 million to the venture. The server farm will cost some NIS 550 million to construct.
Two years ago, the consortium leased the land in a deal the details of which were not disclosed, and it has recently obtained a building permit from the Mateh Yehuda local council. Initial excavation work is expected to begin in November.
The sever farm at Tsor’a will be built in an HPC (high performance computing) configuration, that is, with many connected servers that can carry out complex computing and AI processing tasks. It will be built at a depth of thirteen meters on a total area of 18,000 square meters, and is planned to have an eventual output of 32 megawatts, although the initial output will total 16 megawatts, of which 10 megawatts will power the servers and 6 megawatts will power the peripheral systems such as cooling equipment, and it will be hooked up to a local sub-station of Israel Electric Corporation under an agreement to supply up to 16 megawatts of power.
Unusually, the loan from Mizrahi Tefahot Bank was raised without any requirement by the bank for personal guarantees from members of the consortium or for a primary customer, which are customary terms in financing deals for server farms that have led other Israeli real estate companies to withdraw from the field. It is believed that several banks competed for the deal, among them Bank Leumi. For Mizrahi Tefahot Bank, the deal was led by Adam Ben-Yehuda, head of Project Finance, in the Corporate Banking Division headed by Ofir Morad. The bank is examining the financing of more server farm deals, and recently participated in the recycling of loans by Compass, which operates the server farms of Amazon Israel, amounting to $400 million. Anan Data Centers was advised by DIT Data Center, headed by Nir Poltorak, which planned the installation and served as a strategic-technological consultant alongside Deloitte.
Anan Data Centers is actually made up of two groups that organized separately: Omer Adam’s PAI and the Melul brothers’ Europe-Israel, which is believed to hold more than half of the shares in the venture; and Gaon’s Lian Group, which holds over 40%. Adam and Maor Melul are close friends who became business partners and who have together carried out income-producing real estate deals for more than a decade, amassing most of their properties from deals in which they purchased buildings and renovated them.
An examination by "Globes" found that the value of the group’s income-producing assets is over NIS 1.5 billion. Among these assets is the Queen of Sheba mall in Eilat, bought from Melisron in 2020; the Kenyon Ha’amakim mall in Afula, bought for NIS 120 mn in 2023; the Almog complex in Eilat, which consists of 420 apartments for Eilat hotel workers, bought from Almogim for tens of millions of shekels; sheltered housing complex Ganei Ye’elim in Beersheva, which consists of 207 housing units; and Beit Bezeq in Lazarov Street in Rishon LeZion, bought from the Shlomo group.
Anan Data Centers is estimated to be worth NIS 550-600 million. Adam himself and the business group owned by his family, PAI (Production Adam Investments), also own an Israeli music empire, in which Adam is one artist among many. The group represents other artists, among them Adam’s brothers Gal and Roei; Osher Cohen; Odeya; and Shai Horovitz (aka ShrekDiMC). The group is reportedly a partner with NMC United, controlled by the Edri family, Aroma Music, and producer Benny Menashe, in setting up a company for distribution of music content and collection of royalties from digital platforms such as YouTube, Spotify, and Apple Music.
H.S.M Europe-Israel Investments was active in the past in buying and renovating buildings in Romania and Georgia. It began its activity in Israel with the purchase of plots in Afula. On the basis of Maor Melul’s longstanding friendship with Omer Adam, they developed a business partnership, and bought land in Afula for the construction of a 64 megawatt server farm, but the project in Tsor’a has been more successful because of its proximity to power infrastructure.
In 2020, Adam and Maor Melul met Nessim-Sariel Gaon, owner of Swiss investment house Lian Group. Gaon, a Swiss Jew with a degree in mathematics from University of California, Berkeley, was living in Dubai that year, and came across Adam and Melul when he was looking for a place to stay on shabbat. Through Lian Group he has invested in subsidiaries in digital health and blockchain. Through an investment in a cryptocurrency mining farm he entered the field of sever farms and super-computing. Today, Gaon, the grandson of Swiss-Jewish businessman Nessim Gaon, owns server farms around Europe. As far as is known, despite the international profile of its partners, Anan Data Centers invests in Israel only.
Significant potential in Israel
The Israeli server farms markets has undergone a revival in the past few years thanks to the government cloud computing tender, which obliged cloud computing giants such as Amazon and Google to operate from computing installations within Israel, and also thanks to the Abraham Accords, which made data transfer between Israel, the UAE and Saudi Arabia via undersea cables a reasonable proposition. Specialist companies have arisen such as Shonfeld Engineering and Server Farms, while real estate companies such as Kardan-Geva have become active in server farms. The sector is a complicated one, however, because of heavy regulation, high costs of power and computing, and shortcomings in the power infrastructure. Several Israeli companies have exited the field locally, such as Azrieli Group, while others that weighed entering it, such as Melisron, ultimately refrained.
According to digital infrastructure consulting firm 11Stream, owned by Yonit Goldberg and Oren Nauman, Anan Data Centers has the potential to become one of the five largest server farm groups in Israel, with a total output of 130 megawatts at its two sites, Tsor’a and Afula, by 2030. This would mean that Anan Data Centers will have about 14% of the server farms sector in Israel by the end of the decade.
Mizrahi Tefahot Bank and Anan Data Centers declined to respond to the report.
Published by Globes, Israel business news - en.globes.co.il - on October 8, 2024.
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