Digital Realty and TPG Real Estate, the real estate investment arm of alternative asset management firm TPG unveiled their newly formed joint venture, wherein TPG will take over the majority ownership of three established hyperscale data centres located in Northern Virginia. Despite this, Digital Realty will retain a minority stake in the portfolio and will continue to oversee the day-to-day operations of the assets, ensuring a smooth and uninterrupted customer experience.
“We welcome this partnership with TPG, a highly distinguished investment partner,” said Digital Realty Chief Investment Officer Greg Wright. “The completion of this stabilised hyperscale data centre joint venture bolsters and diversifies Digital Realty’s capital sources with an experienced partner and further enhances the efficiency of our balance sheet. We remain focused on positioning Digital Realty to prudently support our stakeholders’ longer term capacity requirements and look forward to executing on the remaining elements of our capital plan for 2023.”
“Demand for data centres continues to grow rapidly due to data proliferation and the mass adoption of cloud computing. These are long-term trends that we expect will only be accelerated by recent advancements in AI,” said Ty Newell, Business Unit Partner with TPG Real Estate. “Located in the largest and most densely connected data centre hub in the world, the Portfolio is well-positioned to address this demand. We are excited by the outlook for the Ashburn market and look forward to working alongside a world-class partner in Digital Realty.”
The joint venture has integrated three hyperscale data centres into its portfolio, valued at a total of $1.5 billion. These data centres boast a combined IT capacity of approximately 104 megawatts and are predominantly leased by investment grade customers. Based on the annualised in-place cash NOI as of June 30, 2023, factoring in signed leases and known move-outs, the transaction values the three facilities at an approximate 6.0% cap rate.
As a result of this venture, Digital Realty stands to gain around $1.3 billion in gross proceeds. These funds will be utilised to pay off debt, cover transaction-related expenses, and support general corporate purposes.
TPG’s investment in the portfolio is being made through TPG Real Estate Partners, a specialised fund series dedicated to opportunistic real estate ventures.
Digital Realty’s data centres are designed to be eco-friendly, employing construction techniques that require fewer materials while maintaining industry-leading power usage effectiveness (PUE) levels. This focus on sustainability leads to a smaller carbon footprint compared to similar data centres. The company employs water-efficient and free cooling technologies, utilising reclaimed water supplies whenever possible to minimise the use of potable water. Additionally, Digital Realty continues to expand its commitment to reducing the carbon footprint of its data centres by integrating them with renewable energy sources.