Digital Realty-Mapletree Partnership Pumps $1.4 Billion into North American Data Center Portfolio
Digital Realty Announced Selling 10 Powered Base Building® Data Centers; Collaborating with Mapletree Investments And Mapletree Industrial Trust On $1.4 Billion North American Data Center Portfolio
Global Data Center and Cloud infrastructure provider, Digital Realty announced signing definitive agreements with affiliates of Mapletree Investments Pte Ltd and Mapletree Industrial Trust. The deal is worth $1.4 billion, which include selling off 10 Powered Base Building® data centers and the establishment of a joint venture on three existing Turn-Key Flex® hyper-scale data centers.
The acquisition deal enables Mapletree Investments and Mapletree Industrial Trust to own Powered Base Building® portfolio from Digital Realty. The sale is evaluated at approximately $557 million. These 10 properties are fully-leased for which Digital Realty will provide transitional property management services for the Powered Base Building® portfolio for one year from the closing date at a customary market rate.
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By 2020, a joint entity owned by Mapletree Investments and Mapletree Industrial Trust will purchase an 80% interest. Digital Realty will retain a 20% interest, in a joint venture on three fully stabilized hyper-scale facilities located in Ashburn, Virginia.
Mapletree Investments and Mapletree Industrial Trust will acquire its 80% stake for approximately $811 million, valuing these three assets at approximately $1.0 billion.
These three facilities are fully leased and are expected to generate 2020 cash net operating income of approximately $61 million, representing a 6.0% cap rate.
Digital Realty will continue to operate and manage these facilities, and the transaction will be completely seamless from a customer perspective.
At the time of this announcement, Digital Realty CEO A. William Stein stated –
“These transactions represent an important step towards our goal of self-funding our growth and diversifying our sources of equity capital while shrinking our asset base and setting the stage for accelerating growth as the proceeds are redeployed into accretive investment opportunities. We are pleased to partner with the high-caliber team at Mapletree to effect a transaction that meets both companies’ objectives, and we look forward to collaborating with Mapletree as joint venture partners and exploring additional opportunities together worldwide.”
Currently, Digital Realty provides Data Center suites that customers the privacy and control of own data center without a major capital investment. These are pre-commissioned, large suites with distributed redundant design, that can be easily subdivided for immediate fit-out and operational commencement.
The latest Mapletree deal comes within a year of Digital Realty signing an agreement with Mitsubishi Corporation. The collaboration was part of expanding the 50/50 joint venture – MC Digital Realty to acquire a five-acre land parcel in Tokyo with an aim to deliver up to 35.6 megawatts of total IT capacity in Tokyo’s most industrious and energy-dense regions in Japan.
Digital Realty has been a key player in the Data Center Colocation industry. In June 2015, Digital Realty became the first data center REIT to issue a green bond. In 2019, Digital Realty issued its second green bond, €1.025 billion Euro-issuance. Green Bonds are standard bonds with green features, designed to fund projects that have beneficial impacts on the environment compared to business as usual.
The recent innovations in data center management and provisioning helped Digital Realty strike the deal with Mapletree.
Hiew Yoon Khong, Group CEO at Mapletree Investments, said, “We have deepened our presence in the fast-growing data center sector with our second portfolio acquisition in North America. These transactions add high-quality properties in key data center markets underpinned by global cloud and colocation players. Our strategic collaboration with a leading global provider of data center solutions like Digital Realty will enable us to scale up meaningfully in developed economies for this resilient asset class.”
Tham Kuo Wei, Chief Executive Officer of the manager of Mapletree Industrial Trust added, “The proposed transactions will enhance the sustainability of our returns to Unitholders with the increased freehold land component and long leases with embedded rental growth. This transaction and partnership with Digital Realty mark another significant milestone in expanding our presence in a sector with strong growth prospects.
Currently, Digital Realty supports the data center, colocation and interconnection strategies of more than 2,000 firms across its secure, network-rich portfolio of data centers located throughout North America, Europe, Latin America, Asia, and Australia.