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Microsoft Assumes 300,000-SF Datacenter Lease

SANTA CLARA, CA-The Redmond, WA-based software maker assumes control of two neighboring datacenters owned by locally based Digital Realty Trust.

By Brian K. Miller | Updated on July 02, 2007

SAN FRANCISCO-Microsoft Corp. has taken over two existing leases totaling 300,000 sf for adjacent datacenters in Santa Clara. The publicly traded software maker from Redmond, WA assumed the leases from Savvis Communications Inc., which according to SEC filings was paying an annualized rent of $20.40 per sf. The lessor is Digital Realty Trust, a locally based technology REIT that counts Savvis as its largest tenant.

The two properties, which weren’t specified by Digital Realty in its announcement, are 2045 and 2055 LaFayette St. in Santa Clara. In a related deal, Microsoft paid Savvis $190 million for the building’s improvements and equipment, and for early termination of its service contract with Savvis.

Dan Golding, a senior analyst with Tier 1 Research, which tracks the datacenter industry, tells GlobeSt.com that everybody comes out ahead in this deal. Microsoft, which was the sole tenant of the premises, saves money by operating its own facilities and leasing directly from Digital Realty rather than a third-party provider such as Savvis. Savvis, meanwhile, gets $190 million of cash to go out and buy additional datacenters–likely in partnership with Digital Realty–that it can lease out to smaller clients that will order more of its services, which is how the company makes its money.

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