Private equity firm GI Partners has acquired One Wilshire, the leading carrier hotel in Los Angeles and one of the most wired buildings in the world, the company confirmed this week. The new owner, a long-time player in data center real estate, acquired the building from Hines Property Trust. The transaction was conducted through through TechCore, a $1 billion fund managed by GI Partners on behalf of the California Public Employees' Retirement System (CalPERS).
One Wilshire is a key meeting place for the world's communication networks, serving as one of the busiest intersections in global Internet and telecom traffic. The 30-story building in downtown Los Angeles has more than 300 tenants, including dozens of data center firms and telecom carriers. One of the largest tenants is wholesale data center operator CoreSite, which operates more than 150,000 square feet of space in the building. Other tenants include Verizon Communications, Savvis, Level 3 and Global Crossing.
"One Wilshire is one of the preeminent West Coast network facilities," said Michael Wong, Vice President of GI Partners. "The property fits well with TechCore's strategy of acquiring high-quality, core, technology-advantaged properties leased to market leading tenants."
The Data Center Premium
The deal for One Wilshire underscores the premium value of data center real estate. The reported sale price of $437 million works out to $660 a square foot, according to the LA Times, a huge premium to recent valuations for commercial real estate in Los Angeles. By comparison, the U.S. Bank Tower recently sold for about $260 a square foot. That sale price represents a nice return for Hines, which bought One Wilshire in 2007 for $287 million from the Carlyle Group.
One Wilshire is an iconic 30-story, 663,000 square feet building housing data center, office, storage and retail space with a five-level subterranean parking garage.
GI Partners and CalPERS formed TechCore in early 2012 to acquire technology-advantaged properties, including data centers, internet gateways, corporate campuses for technology tenants and life science properties. In its first year the fund has acquired more than 1.7 million square feet of mission critical data center and office properties throughout the United States.
Longtime Partners in Sector
GI and CalPERS have a lengthy shared history of investment in the data center market. In 2001, CalPERS backed GI Partners to acquire dozens of data center and Internet gateway properties, including many distressed properties bought at discount prices during a glut of data center real estate in the wake of the dot-com bust. The portfolio formed the nucleus of Digital Realty, the real estate investment trust that has become the leading player in the global market for mission-critical facilities.
In the past decade, data centers have matured into a new asset class, to the point where the new TechCore fund can focus on stable income properties rather than turnarounds. One Wilshire is a prime example of this strategy, as the building is filled with tenants, with about 60 percent of its space occupied by telecom ro data center firms.
GI Partners recently a controlling interest in IT infrastructure provider SoftLayer to IBM for a reported sale price of $2 billion, and previously acquired and sold the interconnection provider Telx. GI Partners also is a minority owner of managed hosting specialist ViaWest