Digital Realty Trust Spends $148M on Data Centers in San Francisco, Atlanta

For a purchase price of $85 million, Digital Realty Trust Inc. has become the new owner of San Francisco’s 360 Spear St., and for an additional $63 million, the company picked up a data-center facility next to Atlanta's Hartsfield-Jackson Airport.

January 4, 2012
By Nicholas Ziegler, News Editor

356 Spear St., which Digital Realty Trust acquired in July 2010

For a purchase price of $85 million, Digital Realty Trust Inc. has become the new owner of San Francisco’s 360 Spear St. The location, which is a 155,000-square-foot data center, is 100 percent leased. In a separate transaction, the firm also purchased a three-story, 334,000-square-foot data center located adjacent to Atlanta’s Hartsfield-Jackson International Airport, for $63 million.

In a previous deal – when Digital Realty acquired 365 Spear St., adjacent to one of the new locations – the company purchased a total of five data centers From Rockwood Capital for $725 million in July 2010.

The Atlanta building’s sale was structured as a sale-leaseback, with the tenant – an airline – continuing to occupy 167,000 square feet of the space under a new ten-year agreement with Digital Realty. The remaining space is occupied by a firm that offers processing solutions to the global-travel industry.

Scott Peterson, chief acquisitions officer for Digital Realty, characterized both transactions as ones that will bring “attractive, risk-adjusted returns for our shareholders,” noting that the new San Francisco facility will provide expansion space for future customers.

As Commercial Property Executive reported in its December issue, Digital Realty closed a $1.5 billion credit facility for its worldwide operations, and is clearly putting its funds to good use. Additionally, data centers as a sector of commercial real estate are coming into their own. “Companies that benefit from Web traffic conclude that by 2015 the amount of Web traffic will have increased exponentially,” said Richard Scott, leader of Grubb & Ellis Co.’s technology practice group and member of the firm’s data-center practice group. “And when Web traffic increases, the infrastructure that supports the Web needs to increase. That means switches, gears and data centers.”

Digital Realty’s 100 properties cover about 17.9 million square feet. Its portfolio covers 32 markets throughout Europe, North America, Singapore and Australia.