New Tech REIT Adding Three Properties for $92M

MENLO PARK, CA-Digital Realty Trust Inc. has acquired a property in Burbank and placed under contract two additional properties, one in Philadelphia and another in the Minneapolis/St. Paul area. The locally headquartered, newly public REIT focused on technology-related real estate says aggregate square footage of the three properties is 832,500 sf and the combined purchase price is $92 million. The Burbank property acquisition closed on Dec. 21 and the remaining two properties are expected to close in February 2005. Digital Realty CFO Bill Stein declined to reveal the specific location and purchase price for each of the properties. He also declined to identity of the sellers. There is/was no common ownership among the sellers of the buildings. The Burbank property is a 82,911-sf (net rentable), two-story building with a raised floor data center and office space for both telecom and general office use. The property is 100% leased through January 2011 by Qwest Communications International Inc., which utilizes the facility to provide data transit and co-location services to its Southern California customer base.The Minneapolis/St. Paul property is a single-story office building with 88,134 sf rentable. The building is comprised of raised floor data center, a network operations center and general office space. The property is 100% leased through December 2013 by the Mid-Continent Area Power Pool (MAPP), an association of Midwest electric utilities and other electric industry participants. The facility serves as a network operations center for MAPP, overseeing the operations of the power grid throughout the Midwest.The property in Philadelphia is a multi-tenant, 15-story office building with 661,500 sf rentable. The property is 75% occupied. Tenant include InFlow, a division of SunGard Data Systems, a data center for the Radian Group, and clinical affiliates of the Thomas Jefferson University and Hospital and the federal General Services Administration. The property was completely redeveloped in 1998 with the electrical and mechanical systems infrastructure, heavy floor loading, and high ceilings required by technical and medical tenants.Digital Realty went public in November, selling 20 million shares at $12 per share for gross proceeds of $240 million. The 23 properties (about five million sf) the REIT went public with were part of a private equity fund established in 2001 by CalPERS (95%) and CB Richard Ellis Investors (5%), and CalPERS continues to own 40% of the REIT’s operating partnership.The company’s properties are located in markets where technology tenants are concentrated, including the Atlanta, Boston, Dallas, Denver, Los Angeles, Miami, New York, Phoenix, Sacramento, San Francisco and Silicon Valley metropolitan areas. The portfolio consists of telecommunications infrastructure properties, information technology properties, technology manufacturing properties and regional or national headquarters of technology companies. Stein tells GlobeSt.com the company buys its properties for between $200 and $225 per sf. The properties it purchases typically were improved at a cost of between $500 and $1,000 per sf. The REIT’s acquisitions are made with maximum 60% leverage, he says, per agreements relates to its revolving credit facility.