Digital Realty, a leading global provider of data center, colocation, and interconnection solutions, has entered into definitive agreements with affiliates of Mapletree Investments Pte Ltd (MIPL) and Mapletree Industrial Trust for the sale of a portfolio of 10 Powered Base Building data centers. The deal also includes 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.
The company informed that proceeds from the transactions would initially be used to pay down debt. It will ultimately be used to fund future investment activity. "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 A. William Stein, Chief Executive Officer, Digital Realty in a statement in the company press release.
Headquartered in Singapore, MIPL is a leading real estate development, investment, capital, and property management company. MIPL currently manages four Singapore-listed REIT and six private equity real estate funds with assets located across Asia Pacific, Europe, UK, and US markets. Mapletree Industrial Trust, another real estate investment trust, has a portfolio of 87 industrial properties in Singapore and 14 data centers in the United States.
MIPL and Mapletree Industrial Trust will acquire the Powered Base Building portfolio from Digital Realty for a total purchase price of approximately $557 million. These 10 fully-leased properties are expected to generate 2020 cash net operating income of approximately $37 million, representing a 6.6% cap rate.
"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," said Hiew Yoon Khong, Group Chief Executive Officer of Mapletree Investments in a statement.
As per the agreement, 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. They will acquire its 80% stake for approximately $811 million, valuing these three assets at approximately $1.0 billion. These three facilities are fully leased. They are expected to generate 2020 cash net operating income of approximately $61 million, representing a 6.0% cap rate. Digital Realty said that it would continue to operate and manage these facilities.
The data center provider expects the transactions to close in late 2019 or early 2020, subject to customary closing conditions. More than 2,000 firms rely on Digital Realty's secure, network-rich portfolio of data centers located throughout North America, Europe, Latin America, Asia, and Australia. The company has more than 200 data centers to its credit in five continents.