Digital Realty Trust announced a $188 million joint venture with Griffin Capital Essential Asset REIT.
Digital Realty is contributing a 130,000-square-foot turn-key data center in Ashburn, Virginia, valued at about $185.5 million, excluding $2.1 million of closing costs, or $20,611 per kW. The joint venture has arranged a $102 million five-year bank loan.
GCEAR will hold an 80 percent interest in the joint venture and Digital Realty will retain the rest and continue to manage the property for management fees.
The transaction generated net proceeds of about $168.4 million for Digital Realty, which will help the REIT pay down debt and fund other investments.
The deal gives GCEA a fully leased property expected to generate about $13 million per year in revenue. The average remaining tenant lease term is about seven years. Digital Realty raises financing so it can expand its property portfolio and GCEAR makes its inaugural investment the data center space.
Jeff Hoppen, managing director of capital markets for Digital Realty, said, "This joint venture transaction is a significant milestone for Digital Realty, as it furthers our objective of maximizing the menu of available capital options, while minimizing the related cost. The transaction also has the ancillary benefit of reducing our tenant concentration while establishing an attractive private market valuation benchmark for our Turn-Key Flex properties."
The company formed a similar joint venture with Prudential Real Estate Investors on a fully leased 110,000-square-foot facility in Somerset, New Jersey, in October 2013. It also recently sold a property to an unnamed single tenant that was occupying it for $42 million.