DuPont Fabros Technology wants to sell its Piscataway, New Jersey, data center and exit the New Jersey market, which it said was best-suited for retail colocation providers, rather than for companies whose business model is to lease wholesale data center capacity, such as itself.
The plan to sell the property is part of a change in strategy the company has started implementing last year, moving away from retail colocation, expanding the variety of wholesale products it offers, and entering new markets.
Like its biggest competitor Digital Realty Trust, DFT has been rethinking its business strategy, although Digital Realty has decided to expand aggressively into the retail colocation business with its acquisition of Telx, while DFT is stepping away from retail completely. Digital Realty has also been selling properties that don’t align with its new business strategy.
The company leases lots of space and power capacity to the likes of Microsoft, Facebook, and Yahoo. It currently has 12 data centers in four US markets: Northern Virginia, New Jersey, Chicago, and Silicon Valley. The facilities total 3 million square feet and nearly 270 MW of critical power capacity, the bulk of which is in Northern Virginia.
Proceeds from the sale of the New Jersey data center will partially fund DFT’s entry into new markets, including Toronto, Portland, and Phoenix. The company has already started building a massive data center in Toronto.
“NJ1 is a first-class data center, and we have developed many valuable customer relationships during our ownership,” Chris Eldredge, DFT’s president and CEO, said in a statement. “NJ1’s location is best-suited, however, for more retail-oriented operations. Our plan to exit the New Jersey market with the sale of this property will allow redeployment of capital in target markets that match our objectives for growth and profitability.”
As a result of implementing the plan to market the New Jersey data center for sale, the company expects to incur an impairment charge from $115 to $135 million in the fourth quarter of 2015. The charge will lower the facility’s previously estimated value as part of DFT’s portfolio to its current fair value.
While it will not impact funds from operations, the charge will lower the real estate investment trust’s earnings per share by $1.41 to $1.66.
The 360,000-square-foot facility, which sports a massive rooftop solar array, has 88,000 square feet of data center space built out, 70 percent of which is leased to customers. Half of the facility’s 18 MW of power capacity is spoken for, and there’s room to develop a second phase.