GlobeSt.com UPDATE: Digital Realty Closes on Philly, St. Paul Properties

MENLO PARK, CA-Digital Realty Trust, the newly public REIT focused on technology-related real estate, has closed on its $74.6-million acquisition of two office properties totaling about 743,000 sf in Philadelphia and St. Paul. Between the two buildings, tenants with investment grade credit account for 81% of the properties’ net rent.The Philadelphia property is a 15-story, multi-tenant office building with 654,758 sf, including 107,563 sf of vacant space in shell condition. Including the shell space, the property is 75% leased. Tenants 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 purchase price was $59 million, which the company says translates to an initial year unleveraged cash cap rate of approximately 10.2%. For additional information on the Philadelphia transaction, go to Tech REIT Pays $59M for 833 Chestnut St. The St. Paul property is an 88,134-sf single story office and data center building that 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 purchase price was $15.6 million, including the assumption of $9.7 million of debt. The purchase price translates to an initial year unleveraged cash cap rate of approximately 9%. Digital Realty went public in November, selling 20 million shares at $12 per share for gross proceeds of $240 million. The REIT went public with 23 properties (about five million sf) that were part of a private equity fund established in 2001 by CalPERS (95%) and CB Richard Ellis Investors (5%). 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. Digital Realty CFO Bill Stein told GlobeSt.com in January that 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.