DuPont Fabros ACC4 pod
A look inside a data center pod at the DuPont Fabros ACC4 data center in Ashburn, Virginia (2010)

Anexio Buys Bankrupt Net Data Centers’ East Coast Assets

Renegotiates four data center leases with DuPont Fabros

Anexio Technology Services, a Raleigh, North Carolina-based IT services firm, has acquired East Coast data center assets of the bankrupt service provider Net Data Centers, formerly Net2EZ, giving some relief to one of the troubled company’s landlords DuPont Fabros Technology.

Squeezed by high operating costs and competition in a busy market, Net2EZ filed for bankruptcy early this year and changed its name to Net Data Centers shortly after. Three Twenty-One Capital Partners, the investment banking firm Net retained to help sell its assets, said the client’s financial problems were caused by its “above-market” data center rental rates.

On DuPont Fabros’s third-quarter earnings call last week, the wholesale data center provider’s executives acknowledged that Net’s rates were substantially above market. Anexio has signed new leases with DuPont at all four East Coast data centers Net uses at lower rental rates and for less capacity.

Anexio leases will generate $0.085 per kW annually for the landlord, compared to $0.16 per kW that was generated by Net leases, DuPont CFO James Foster said on the call. “Given that Net's leases were well above market, the base rent on the new leases decreased 34 percent per kW month on a cash basis and 18 percent per kW per month on a GAAP basis,” he said.

Anexio leased about 2 MW less capacity, taking about 4 MW across the three facilities in Virginia and one in New Jersey.

Prior to the Anexio deal, DuPont had a revenue-sharing agreement with Net, which could not continue paying rent. The data center provider has been receiving more than 80 percent of all revenue from Net customers in its facilities through the agreement, making $3.6 million by the time the Anexio deal closed and the agreement ended.

DuPont CEO Christopher Eldredge said on the call the lease would give Anexio the ability to provide managed services on top of the Net data center footprint. The company has not had a substantial data center footprint until now, he said.

Andrew Power, CFO of Net’s other big data center landlord in California, Digital Realty Trust, said Digital was “on the cusp of a happy ending to the Net Data Centers bankruptcy.”

Net, he said on Digital’s third-quarter earnings call last week, has chosen to assume all of its leases at Digital’s downtown Los Angeles and El Segundo with no changes to rental rates. Net has been current with Digital on its obligations made after its bankruptcy petition.

The tenant still owes Digital $1 million in pre-petition rent, which the landlord expects to collect this quarter.

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