Digital Realty has entered into definitive agreements with affiliates of Mapletree Investments Pte Ltd and Mapletree Industrial Trust for the sale of a portfolio of 10 Powered Base Building data centers and the establishment of a joint venture on three existing Turn-Key Flex hyper-scale data centers. The total consideration for both transactions will be approximately $1.4 billion.
Under the terms of the agreements, Mapletree Investments and Mapletree Industrial Trust will acquire the Powered Base Building portfolio from Digital Realty for a total purchase price of approximately $557 million.
According to a prepared statement, these 10 properties are fully leased and are expected to generate 2020 cash net operating income of approximately $37 million, representing a 6.6% cap rate. 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.
Separately, an entity jointly owned by Mapletree Investments and Mapletree Industrial Trust will purchase an 80% interest, and 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 billion.
According to a release, those 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, the report says.
Hiew Yoon Khong, Group CEO of 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.”
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,” said Digital Realty Chief Executive Officer A. William Stein. “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.”
The transactions are expected to close in late 2019 or early 2020 and are subject to customary closing conditions. Proceeds from the transactions will initially be used to pay down debt and will ultimately be used to fund future investment activity.