Apple Buys California Data Center

Apple Computer has bought a 107,000 square foot former WorldCom/MCI data center in Newark, Calif. for $45 to $50 million, according to the San Jose Business Journal. Apple acquired the property from an affiliate of Stream Realty Partners, the Dallas investment fund which scooped up multiple data centers at bargain prices.

Even as the market recovers, Stream Realty isn't done buying. As it was closing the Apple deal, it acquired a 90,000 square foot facility in Santa Clara that was intended for data center use, but never fully built out.

The Newark data center was one of 23 premier data centers built by WorldCom to meet anticipated demand for a surge in web hosting business, which never materialized after the dot-com collapse. Stream had purchased the property last June from MCI which finished the facility in 2001 but never occupied it. The price appears to be one of the best seen yet for the former WorldCom sites, collectively known as the "NFL" data centers after a build-out that closely tracked major football cities. In 2003 three of the centers were sold though WorldCom's bankruptcy proceeding, with a high price of $38.3 million for the site in Somerset, N.J. that was purchased by Wachovia.

As the BizJournal story notes, the deal is another sign of the recovery of the data center market in Silicon Valley. "Rental rates and purchase prices are very fluid at the moment" amid rapidly changing supply-and-demand dynamics, according to Jerry Inguagiato of CB Richard Ellis in San Jose. "Users know the longer they wait, the more expensive these facilities are bound to get, so they see it's in their interest to control these assets" by purchasing the real estate or negotiating purchase options for leased facilities.