Digital Realty Buys Phoenix Internet Gateway

Digital Realty Trust (DLR) has acquired 120 East Van Buren, the premier carrier hotel for the Phoenix, Ariz. metropolitan area, for $175 million, the company said today. Digital Realty also purchased data center facilities in Ft. Worth, Texas and Amsterdam, The Netherlands, and announced the sale of Denver's Stanford Place II for a gain of $17.9 million.

The acquisition of the 347,000 square foot Phoenix property from Sterling Network Services gives Digital Realty a prime building in one of the fastest-growing markets for disaster recovery and corporate application hosting. It serves as the primary hub for Internet traffic in the greater Phoenix area. The building contains 175,000 square feet of data center space, including over 95,000 square feet of space operated by the building for corporate users, as well as an 11,000 square foot meet-me-room (MMR) that facilitates access to the numerous carriers serving the property. Digital Realty Trust plans to add 30,000 square feet of new raised floor to accommodate the increasing demand for highly improved, custom data center space in the Phoenix market.

"The acquisition of Phoenix's premier Internet gateway facility represents a very significant addition to our portfolio," said Digital Realty Trust CEO Michael Foust. "It enhances our presence in this important top tier market and expands our ability to provide exceptional data center and collocation services to our corporate and network customers. There are over 40 different fiber carriers operating in the facility, and with the substantial power available at the property, the building accommodates mission critical applications for a wide variety of corporate users."

"Additionally, the acquisition of the highly improved data centers in Ft. Worth and Amsterdam further expands our footprints in these key markets while adding to our portfolio of stabilized, income producing properties," Foust added.

Digital Realty paid $50.6 million for the Fort Worth site, which was a sale leaseback deal with Savvis, which had announced the gain from the sale but hadn't identified the buyer. The property was built in 2000 and spans 263,700 square feet, consisting of a single-story 109,500 square foot fully improved data center, a two-story 39,000 square foot annex containing office and conference facilities, and an 115,500 square foot warehouse. The facility is 100% leased for 15 years to Savvis, which has the option to convert much of the warehouse space to a fully improved data center to accommodate its growth.

The Amsterdam acquisition consists of twin 28,000 square foot data center buildings constructed in 2000 specifically for a major European IT services company, which occupies 100% of the property through 2015. Combined, the buildings contain approximately 33,000 square feet of raised floor with the balance used for technical support and office space. The purchase price for the property was euro 8.875 million, or approximately $11.3 million based on current exchange rates.

Digital Realty Trust also announced the sale of Stanford Place II, a 366,000 square foot suburban office building located at 7979 East Tufts Avenue in the Denver Tech submarket of Denver, Colorado. The property was originally acquired in 2003 by GI Partners, the predecessor to Digital Realty Trust. Occupancy was increased from 84% to 97%, and the site was sold for $60.4 million, producing an approximate $17.9 million profit for the company.

"We were able to complete our repositioning strategy earlier than anticipated," said Foust. "The sale of this non-core asset represents an opportunity for us to realize very attractive returns on our investment and to redeploy the capital into our data center and Internet gateway acquisitions program."